The U.S. Treasury Department said China trimmed its holdings of U.S. Treasury securities in February 2011 for the fourth consecutive month by $600 million. China retained its position as the largest foreign holder of U.S. Treasury securities with $1.1541 trillion.

Japan, the second largest foreign holder of U.S. Treasury securities, boosted its holdings by $4.4 billion to $890.3 billion in February.

Standard & Poor's, a major global credit rating agency, has recently downgraded its credit outlook from "stable" to "negative" for the U.S. sovereign debt, citing large budget deficits and rising government indebtedness. This move reignited concerns over the safety of China's foreign exchange reserves.

Xia Bin, a member of the Monetary Policy Committee of the People's Bank of China, said it is necessary for China to further diversify its investments of foreign exchange reserves, such as acquiring resources and technology needed for the real economy.

"But a permanent solution is to control the size of the foreign exchange reserves and shrink trade surplus." said Liu Yuhui, a researcher with the Institute of Finance and Banking at the Chinese Academy of Social Sciences.