The latest monthly Treasury International Capital (Tic) data showed that China's holdings of Treasury bills, notes and bonds rose to $585bn in September from August's level of $541.4bn. In contrast, Japan's holdings slipped from $586bn to $573.2bn.
The figures also showed that US investors sold a record $38bn in foreign bonds, following record sales in August and July. That repatriation of funds supported the dollar and will also help the US finance its current account deficit.
“The big story in US Treasury foreign purchases in September was that China's holdings of US government debt surpassed Japan for the first time,“ said George Goncalves, strategist at Morgan Stanley.