China in September increased its holdings in U.S. Treasury securities for the third consecutive month by $15.1 billion to $883.5 billion, said the U.S. Department of Treasury.

China remains the largest foreign holder of U.S. Treasury securities, ahead of Japan, which increased its holdings by $28.4 billion in September to $865 billion. Total holdings of Treasury securities by all foreign countries amounted to $4.269 trillion, an increase of 1.3 percent from the previous month.

The securities are key to funding the massive U.S. budget deficit that reached a dizzying $1.29 trillion in the 2010 fiscal year ending on September 30, slightly down from the record $1.42 trillion deficit set in 2009.

Economists believe the U.S. Treasury securities are still a relatively safe home for capital given clouds gathering over the global economy. For China, it is also an effective channel of investment for the country's trade surplus, said Jiang Shu, a senior analyst at the Industrial Bank Co. Ltd.