The large amount of foreign reserves will increasingly challenge the nation's foreign exchange asset management, said Yi Gang, vice-governor of the central bank and head of the State Administration of Foreign Exchange, in January.
Wang said other debt-purchase options cannot match the strength and security of US debt in the short term, although the government is well aware of the necessity to diversify to lower the risks.
In December 2010, foreign holdings of Treasury securities rose 0.6 percent to $4.37 trillion. Japan increased its holdings by 0.7 percent to $883.6 billion in December, followed by Britain, which boosted its holdings by 5.8 percent to $541.3 billion.
In 2010, China cut its holdings by $3.2 billion from $895 billion one year earlier. Japan's portfolio increased by $118.4 billion while Britain tripled its holdings of US treasury securities in the same period.
Zhang Monan, a researcher with the State Information Center, said as the US monetary-easing policy will dilute the value of the dollar and China's dollar assets in the longer term, the net selling is a natural move to control risks and the country will continue to diversify its investment.
China may increase holdings of treasury debt in Europe. It has promised to purchase Spanish treasury debt of 6 billion euros ($8.1 billion) and expressed interest in buying Portuguese and Greek debt.