China increased its holdings of Republic of Korea's (ROK) treasury bonds by 147.3 billion Won (US$125.4 million) in August according to a foreign investment report released September 6 by South Korea's Financial Supervisory Service (FSS). The figure was sharply down from China's July net purchases of 360 billion Won.

At the end of August, China's net holdings of ROK treasury bonds this year were worth 2.871 trillion Won (US$2.43 billion), second only to those of Luxemburg and the United States. China's holdings amounted to 16.97 percent of overseas net investment in Korean bonds.

Korea's FSS said the biggest buyer of Korean bonds in August was Thailand, with net purchases of 1.132 trillion Won, followed by Luxemburg, the Netherlands and the United States. Despite the sharp fall in China's July purchases, the country's net holdings of ROK bonds in June were 111 percent up from the same time the previous year, according to a July statement by the RSS.

Chen Fengying, director of World Economic Research Institute at the China Institute of Contemporary International Relations (CICIR), said China is steadily diversifying its investment assets. But Korean bonds are not a major investment target since the Won is not a major world currency. As economic prospects and financial markets in the United States and Europe begin to improve, China's investment of its foreign exchange reserves will probably return to American and European bonds.

China's business press carried the story above on Tuesday. China.org.cn has not checked the stories and does not vouch for their accuracy.