China increased its holdings in U.S. Treasury securities by $5.7 billion in June for the third straight month, after five consecutive months of declines, said the U.S. Treasury Department. China retained its position as the largest foreign holder of the securities with $1.1655 trillion in its portfolio.

Domestically, many fret over the safety of China's U.S. Treasury holdings due to weakness of the U.S. economy and growing government indebtedness. For the first time in history, Standard & Poor's on August 5 lowered the rating on the U.S. sovereign debt from AAA to AA+, and also left open the possibility of a further downgrade if U.S. economic health worsens.

China adjusts its holdings according to market situations, said the State Administration of Foreign Exchange. But it is still necessary for the U.S. Government to safeguard interests of investors and take measures to boost financial market confidence.

Ma Jun, a Hong Kong-based economist with Deutsche Bank, said he believed the feasibility of shifting to other investments is very limited for China.

"Either some markets are too small or those markets are bigger risks than the U.S. Treasury," he said. "Moreover, any significant selling by China of U.S. dollar assets would be noticed by global markets and could spark panic selling of dollar reserves on a grand scale."