The cash-rich Chinese government reduced its US Treasury bond holdings to 867.7 billion dollars from 900.2 billion dollars in April, the Treasury said in a report on international capital flows.

China, the world's largest holder of foreign-exchange reserves, had raised its holdings in the prior two months from a 2010 low of 877.5 billion dollars in February.

Still, China remained far ahead as the top foreign debt holder, followed by Japan, which also pared its holdings, to 786.7 billion dollars from 795.5 billion in April.

Third-placed Britain increased its holdings to 350.0 billion dollars from 321.2 billion in April.

Overall, net Treasury international capital (TIC) flows fell 57 percent to 35.4 billion dollars in May, the data showed, suggesting easing concerns about the European debt crisis.

"The May TIC data along with the latest US trade results point to less upward pressure on the greenback, which is good news for American exporters," said Tu Packard at Moody's Economy.com.

"However, the outlook can change on a dime during this period of transition and considerable uncertainty. The sovereign debt crisis in Europe still simmers, and the Fed has revised down its 2010 growth forecast."

The Federal Reserve on Wednesday lowered its 2010 growth forecast for the world's largest economy, to 3.0 to 3.5 percent, from the 3.2-3.7 percent range predicted just months ago.

In March, net TIC flows hit a record 141.4 billion dollars as investors around the world pulled capital from the eurozone on concerns that bloc member Greece was on the brink of a sovereign debt default.

The crisis, which sent the euro to four-year lows against the dollar, also deterred China and several other countries with massive foreign reserves from diversifying away from US bonds and other long-term US securities, experts said.

China has repeatedly criticized the United States for its snowballing debt levels, fearing that its investment in US government bonds could turn sour if a debt crisis emerges.

earlier related report
Hong Kong passes minimum wage law
Hong Kong (AFP) July 17, 2010 - Hong Kong on Saturday passed its first minimum wage law, a controversial issue that has divided the city's business sector and labour groups for more than a decade.

Lawmakers hailed the passage of the bill -- secured after more than 40 hours of heated debate -- as a historic moment for Hong Kong, where policymaking is often heavily influenced by the powerful business elite.

Officials said the law will take effect next year, and a government-appointed task group is expected to propose a minimum wage level in the coming months.

But pro-democracy legislators, whose numerous attempts to have the bill amended were blocked by their pro-government counterparts, said there were many loopholes in the new law.

Lee Cheuk-yan, lawmaker and a leader of Hong Kong Federation of Trade Unions, said: "No doubt it is a historic moment for Hong Kong."

"We have now said goodbye to an unfair practice in a capitalist economy and acknowledged the fact that workers should be rewarded for their hard work," he told AFP.

Recent surveys showed that many workers at large retail chains are only paid between two and three US dollars an hour.

Lee said it was "regretful" that the legal framework for setting the minimum wage will be largely controlled by the government.

Under the law, all members of the task group will be picked by the city's chief executive. The legislature can only approve or reject the wage level proposed by the group, but cannot make any amendment.

The law will require the task group to review the wage level once every two years, instead of once a year as proposed by trade unions.

"We will have to use public pressure to campaign for a fair minimum wage level, since under the legal framework the control will be largely in the hands of the government," Lee said.

Unions have pushed for the minimum wage to be fixed at 33 Hong Kong dollars (4.2 US dollars) an hour, saying anything less would not cover basic expenses with living costs having risen sharply in recent months.

Many countries already have minimum wage legislation in place, with the hourly rates in New York and London set between 7.25 and 8.80 US dollars.

Hong Kong's minimum-wage proposal had faced stiff opposition from some of its largest employers, with some threatening large-scale layoffs if the change was introduced.

Michael Chan, chairman of fast-food giant Cafe de Coral -- who was ranked by Forbes magazine as the 35th richest man in Hong Kong in 2009 -- has said his company might issue a profit warning if the hourly rate proposed by the unions became law.

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