China reduced U.S. Treasury holdings in 2011 China's U.S. Treasury holdings fell to $1.15 trillion at the end of last year from $1.16 trillion at the end of 2010. Charles Dharapak / Associated Press By David Pierson March 1, 2012, 4:25 p.m. Reporting from Beijing - China, the largest foreign holder of U.S. government debt, reduced its holdings of federal securities last year, according to revised data released Wednesday by the Treasury Department. China's holdings fell to $1.15 trillion at the end of last year from $1.16 trillion at the end of 2010. It reached a high of $1.31 trillion in July. The drop suggests China could be diversifying its stock of $3.2 trillion in foreign reserves compiled through years of trade surpluses. That could reverberate to American consumers, whose low-interest rates have largely been financed by China's hefty appetite for U.S. debt. However, the effect of Wednesday's news appears minimal for now. Global demand for U.S. treasuries is currently running high because of Europe's worsening financial conditions. Foreign holdings of U.S. treasuries rose nearly 13% last year to $5 trillion. China has promised to diversify its holdings to reduce its reliance on the dollar. The central government has been under public pressure to steward its investments more wisely. Though China has pledged to invest more in the Eurozone, the world's second-largest economy has few options as liquid as U.S. debt to park its cash. The revised survey improves upon the Treasury Department's unreliable monthly reports by accounting for foreign purchases bought through intermediaries. China is believed to purchase a significant amount of U.S. Treasuries through British banks. China refines its role in global gold market World Bank to China: Your economic model is 'unsustainable' Focus shifts from China's currency to its other trade policies