The lack of clarity about a resolution of the eurozone debt crisis, coupled with deepening doubts over a global economic recovery, sparked China’s move to invest in safer assets such as US government securities, analysts said.

The net increase in US Treasury holdings was $11.3 billion in September, the largest jump since March 2010.

The rise boosted China’s total US debt holdings to $1.15 trillion, according to the US Department of the Treasury.

Lu Zhengwei, chief economist at Industrial Bank Co Ltd, said that compared with the gloomy and uncertain economic situation in Europe, lending to the US could provide relatively safer returns.

According to a report released on Wednesday by the People’s Bank of China (PBOC), as of Sept 30, the euro had fallen 7.72 percent against the dollar compared with the end of June.

As of Sept 30, the 10-year US Treasury yield was 1.92 percent, down 124 basis points from the end of the second quarter, the PBOC report showed.

“The decrease in the US securities yield indicated more positive market expectations for their long-term return,” said Lu, who forecast faster economic growth in the US in the coming months.

China bought $20.7 billion of long-term US government debt in September, after sales of $40.1 billion in August and $30.9 billion in July, the US Treasury report said.

The US economy is recovering at a relatively faster pace than earlier this year, which has rekindled global investors’ appetite for US debt, analysts said.

Japan, the second-largest foreign investor in Treasury securities, lifted its holdings by 2.2 percent to $956.8 billion in September.

The United Kingdom increased its US debt holdings to $421.6 billion in September from $397.2 billion in August, the Treasury figures show.

Source: China Daily