Japan overtook China as the largest foreign holder of U.S. Treasury securities at the end of 2009 after China sold $34.2 billion in American securities last December. China had previously surpassed Japan as the largest holder in September 2008. Since then, China has increased and reduced its holding from time to time. The latest amount, however, accounted for 4 percent of all Chinese holdings and was the biggest single month reduction in years. Some analysts attributed the reduction to intensifying bilateral trade disputes and political threats from the United States. Three scholars recently shared their views with Xinhua News Agency. Edited excerpts follow:

Tan Yaling (President of China Foreign Exchange Investment Research Institute): China's decision was made after careful consideration of the market risk and was part of the government's plan to diversify the investment portfolio of its huge foreign exchange reserves.

This reduction does not necessarily mean China is giving up investing in dollar assets. On the one hand, we still hold a large amount of dollar-denominated assets. Therefore, to ditch U.S. Treasury securities completely would exert an enormous negative impact on our dollar assets in hand, leading to a substantial loss in value. On the other hand, no other currency can compare with the U.S. dollar's status in the world in terms of stability, security and profitability.

Liu Yuhui (Director of the China Economy Appraisal and Rating Center of the Institute of Finance and Banking under the Chinese Academy of Social Sciences): It was the right time to reduce the U.S. Treasury securities holdings, because in the long run, we expect a downward tendency in the value of U.S. dollars.

The debt risk of the U.S. Government is ballooning and we have not seen any positive results in the short term. Judging by President Barack Obama's reform plans, it will be hard to reduce America's deficit, giving rise to worries from dollar asset investors.

A weak greenback will be the only solution for the United States to shake off its economic imbalance and rejuvenate its economy, as the weak currency could help it develop a stronger manufacturing sector, expand exports, lower the debt burden and drive the development of emerging industries such as the low-carbon economy.

The most recent dollar appreciation was only temporary and was pushed up by a sharp depreciation of the euro due to rising risks among the euro area caused by the Greek debt crisis. Therefore, it was wise to reduce U.S. holdings when the dollar rebounded.

Cao Honghui (Director of the Department of Financial Markets of the Institute of Finance and Banking under the Chinese Academy of Social Sciences): Currently, Japan, China and the UK are the biggest holders of U.S. Treasury securities and these standings will remain the same for a relatively long period of time. China might increase or decrease its dollar asset holdings in the future, but in the long run, it is a must to diversify and improve its foreign exchange investment portfolio. If the dollar loses its value substantially, it will lead to unavoidable losses to all securities holders.

The ever-expanding U.S. federal government debt and local government debt, as well as the high budget deficit, will require the government to print more greenbacks, thus inevitably leading to dollar depreciation, which in turn will result in a considerable loss of dollar assets held by foreign creditors.