For a fifth straight month, China trimmed its holdings of securities by $9.2 billion in March, according to the U.S. Treasury Department. China retained its position as the largest foreign holder of U.S. Treasury securities with $1.1449 trillion in its portfolio.

Meanwhile, the second largest foreign holder, Japan, continued its net buying, increasing its holdings by $17.6 billion to $907.9 billion. This move eased concerns that the devastating earthquake and tsunami would lead Japan to scale back its purchases and use the capital for reconstruction.

Total holdings of U.S. Treasury securities by all foreign countries rose by $4.9 billion to $4.4792 trillion at the end of March. The securities are key to funding its massive U.S. budget deficits. China's net sales of U.S. Treasury securities amounted to $9.2 billion in March, down from $11.2 billion in last November.

Given a weakening U.S. dollar and rising government debt, worries about safety of China's Treasury holdings are proliferating.

Zhao Changhui, a senior analyst with the Export-Import Bank of China, said dollar depreciation and inflation in the United States would devalue China's foreign exchange reserves, though the U.S. Government is less likely to default on its sovereign debt.

John Silvia, chief economist at Wells Fargo, the fourth largest U.S. bank, said the current U.S. budget situation was unsustainable over time.

"If significant progress is not made, you will probably get a depreciating dollar, probably higher interest rates, higher inflation, which means that many Asian investors will have capital losses on their U.S. treasury portfolios," he said.

Yi Gang, Deputy Governor of the People's Bank of China and Director of the State Administration of Foreign Exchange, downplayed the concerns. "For years, China has spared no effort to diversify investments of its foreign exchange reserves and ensure asset returns and safety," he said.