China reduced its holdings of U.S. Treasury debt in May as total foreign holdings of government debt posted a slight increase.
The Treasury Department says China's holdings fell by $32.5 billion to $867.7 billion. Total foreign holdings edged up a slight $5.8 billion to $3.96 trillion.
The drop in China's holdings and the weak showing overall was a surprise. Analysts expected a sizable gain because they thought foreign investors would seek the safety of U.S. Treasury debt, responding to fears over the European debt crisis.
