China increases holdings of US Treasury securities

China, the biggest buyer of US Treasury debt, boosted its holdings in April, the first increase after five straight declines.

The United States Treasury Department said Wednesday that China increased its holdings by US$7.6 billion to US$1.15 trillion.

Total foreign holdings of Treasury securities rose 0.2 per cent to US$4.49 trillion.

Japan, the second-largest buyer of US debt, trimmed its holdings slightly by US$1 billion to US$906.9 billion. There had been concerns that the March 11 earthquake and tsunami would lead Japan to sharply reduce its purchases to use the money for reconstruction.

The government hit its US$14.3-billion borrowing limit on May 16. Since then, Treasury officials have been making various bookkeeping manoeuvres to clear room to continue normal borrowing operations.

Treasury Secretary Timothy Geithner has said he will run out of manoeuvring room by August 2 if Congress has not passed a higher debt limit by that time.

The debt limit is the amount the government can borrow to finance its operations.

Republicans are demanding spending cuts that would equal the total increase in the debt limit. But Federal Reserve Chairman Ben Bernanke warned Republicans on Tuesday that it would be dangerous to use an increase in the debt ceiling as leverage to get spending cuts.

The deficit is expected to exceed US$1 trillion for the third straight year as the government is borrowing 40 cents of every dollar it spends, and a large portion of that borrowing is financed by foreigners.

The Treasury report said that the United Kingdom, the third-largest holder of Treasury securities, increased its holdings to US$333 billion in April, up from US$325.2 billion in March.

- AP