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China has slashed its holdings of US government securities by the largest amount since October 2000.
The Asian nation cut its holdings by about $25 billion (£15 billion) — or 3.1% — in June, according to latest figures from the US Treasury.
Analysts believe that Beijing, which is the biggest holder of US Treasuries, is looking for ways to diversify its investments amid concerns over inflation and the increasing budget deficit in the US.
The Obama administration's giant stimulus package has caused the deficit to widen.
China also fears that inflation will rise as a result of the stimulus spending, reducing the value of the US currency, which will hit the value of the debts China holds in dollars.
However, other foreigners renewed purchases of US financial assets in June, with British and Japanese investors upping their holdings as investors looked for safe havens for their cash.
China has said that it would like to find an alternative to the US dollar as the currency of choice for foreign exchange reserves.
