"As these treasuries are much sought after by international investors, it is time China took advantage of the timing to cut its holdings," Zhang said.

China should use its abundant foreign exchange reserves to buy commodities and energy products to support its economic growth, said Guan Qingyou, a researcher with Tsinghua University.

Premier Wen Jiabao has said that the country is studying ways to use its foreign exchange reserves to buy equipment and technologies that are key to its economic development.

Despite uncertainties about the prices of US treasuries, international investors remain invested in the US market. The report has shown that net capital inflows into the US rose to $74 billion in December from US$61.3 billion in the previous month.

Foreign holdings of dollar-denominated short-term US securities, including treasury bills, increased US$2.1 billion in December.

Net foreign purchases of long-term securities reached US$22.4 billion in December compared with a net selling of securities worth US$37.6 billion in November, according to the report.

(China Daily February 19, 2009)