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| China cuts holdings of US debt after ratings downgrade | China cuts holdings of US debt after ratings downgrade |
| (40 minutes later) | |
| China has reduced its holdings of US debt to their lowest level in a year, after the US's credit rating was downgraded by Standard & Poor's (S&P). | |
| China sold $36.5bn (£23.2bn) in US Treasuries or bonds to cut its holding to $1,137bn in August, latest data by the US Treasury department showed. | China sold $36.5bn (£23.2bn) in US Treasuries or bonds to cut its holding to $1,137bn in August, latest data by the US Treasury department showed. |
| In August, S&P cut the US's credit rating to double A+ from triple A over concerns about budget deficits. | |
| China is the largest foreign buyer of US government debt. | China is the largest foreign buyer of US government debt. |
| Other countries in the region such as Hong Kong, Taiwan and Singapore also reduced their holdings of US Treasuries in August. | |
| "These players are sitting on large dollar-denominated assets already, so they can afford to take a longer view," said Michael Woolfolk of BNY Mellon. | "These players are sitting on large dollar-denominated assets already, so they can afford to take a longer view," said Michael Woolfolk of BNY Mellon. |
| "They would have been the ones most concerned about a downgrade on their current holdings," he added. | "They would have been the ones most concerned about a downgrade on their current holdings," he added. |
| 'Safe-haven appeal' | |
| However, the overall demand for US Treasuries increased in August amid rising global economic uncertainty. | |
| The United Kingdom and Switzerland increased their holdings by almost $40bn each, while Japan increased its investment by $21.8bn to $936.8bn. | |
| The have been concerns that the debt crisis in some European economies may hurt growth in the region. | |
| At the same time there are fears that recovery in the US, the world's biggest economy, may be faltering. | |
| Analysts said the combination of these factors reduced the appetite for risk among investors, who have turned to traditional safe havens. | |
| "People were afraid of a Lehman-like crisis in August, so money was funnelled into Treasuries - notes and short-dated paper alike," said Mr Woolfolk. | |
| Millan Mulraine of TD Securities said: "The flows reinforce the safe-haven appeal that Treasuries continue to enjoy, even if the turmoil was being driven in part by concerns about the quality of these assets". |