The U.S. Treasury Department said China trimmed its holdings of U.S. Treasury securities last December for the second consecutive month by $4 billion, or 0.4 percent of its total holdings. China still holds $891.6 billion in U.S. Treasury securities. The net reduction in 2010 amounted to $3.2 billion.

China remains the largest foreign holder of U.S. Treasury securities, ahead of Japan, which increased its holdings by $6.4 billion in December to $883.6 billion. Total holdings of Treasury securities by all foreign countries amounted to $4.37 trillion at the end of December 2010.

Total foreign purchases of Treasury notes and bonds were $54.6 billion in December, compared with $61.7 billion in November. 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 September 30, 2010.

Economists believe prospects for accelerated U.S. economic growth, propelled by Federal Reserve's purchases of treasuries, are drawing in overseas investors, along with concerns about the creditworthiness of debt-stricken European nations.