China's holdings of U.S. Treasury securities fell to a six-month low in January, according to data released by the U.S. Treasury Department on Thursday.
China's holdings of U.S. treasuries fell to 1.1682 trillion U.S. dollars in January, down from 1.1849 trillion dollars in December, reaching the lowest level since July, the data showed.
But China remains the largest foreign holder of U.S. treasuries, followed by Japan, whose holdings went up 4.3 billion dollars to 1.0658 trillion dollars in January.
By the end of January, overall foreign holdings of U.S. Treasury securities slightly dropped to 6.2604 trillion dollars from 6.2849 trillion dollars in the previous month.
Analysts say higher U.S. inflation and interest rates have made holding U.S. treasuries more expensive, reducing overseas demand for U.S. treasuries in recent months.
Benchmark U.S. 10-year treasury yields rose to 2.83 percent on Thursday from 2.4 percent by the end of last year, according to Bloomberg data.
As President Donald Trump is taking a tough stance against China on trade, investors are keeping a close eye on China's holdings of U.S. treasuries. But market analysts say China is unlikely to use dumping U.S. treasuries as a tool for retaliation, as it would come at a heavy cost to both countries.
Like other investment moves, China's purchase of U.S. treasuries is a market-based behavior and is subject to professional management based on market conditions and investment targets, China's top forex regulator said in January.
The Chinese forex managers are responsible investors whose investments have helped stabilize the international financial market and the value preservation and growth of China's forex reserves, said the State Administration of Foreign Exchange.