Japan eclipses China as top US Treasury holder

China\'s bond holdings dropped substantially to 755.4 billion dollars in the last month of December from 789.6 billion in November, said the Treasury\'s international capital data report.

Japan\'s holdings increased to 768.8 billion dollars in December from 757.3 billion dollars in November, according to the data.

China had grabbed the top position from Japan in September 2008 and gradually increased its US bond holdings in relation to Tokyo until December last year, Treasury figures showed.

Beijing had expressed fears late last year about the safety of its dollar-linked assets in view of Washington\'s burgeoning budget deficit and the declining greenback at that time as the American economy struggled to emerge from a brutal recession.

US Treasury Secretary Timothy Geithner traveled to Beijing in June to reassure Chinese leaders, saying their money is "very safe" despite the US budget deficit, which he pledged to cut.

But Chinese state media expressed opposition to Beijing\'s policy of buying massive amounts of US debt, saying the value of China\'s assets could be battered as a result of the global financial crisis.

US-China relations have deteriorated in recent months with problems seen on multiple fronts.

In the latest dispute, President Barack Obama\'s administration rebuffed Beijing\'s demand to cancel his meeting this week with the Dalai Lama.

The deepening public spat over Tibet, a row over US arms sales to Taiwan, China\'s dispute with Google and trade and currency disagreements, come at a key diplomatic moment, as Obama seeks Chinese help to toughen sanctions on Iran.

Britain was the third biggest holder of US Treasury bonds, worth 302.5 billion dollars in December, rising from 277.6 billion in November.

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