China has launched a barrage of criticism at the United States over the debt crisis, but analysts say the world's largest foreign holder of US debt has no choice but to maintain its Treasury holdings.

Chinese state media have savaged the United States over what they call its "addiction to debt," in a series of unusually critical articles.

An analyst writing in one newspaper went so far as to compare US debt to a "Ponzi scheme", in the wake of an unprecedented US downgrade.

China's central bank said last week it would diversify its foreign currency investments, warning of "large fluctuations and uncertainty in the US Treasury bond market," even as it welcomed a deal to raise the US debt ceiling.

But despite the rhetoric, analysts said shifting out of the US dollar can only be a long-term aspiration, with Beijing's hands tied for several reasons in the short run.

China has the world's largest foreign exchange reserves at more than $3 trillion, and experts said it would be difficult for it to find alternative investment options able to absorb such volume.

With around $1.2 trillion in US Treasuries, Beijing also cannot conduct large-scale selling of dollar assets without diminishing the value of its remaining holdings, they said.

"Any significant selling by China of US dollar assets would be noticed by global markets and could spark panic selling of dollar reserves on a grand scale," Ma Jun, Hong Kong-based economist with Deutsche Bank, said in a report.

With sovereign debt worries in European countries such as Italy and Spain threatening the entire eurozone, investment in US debt might still be attractive, said Liu Hongke, economist at CCB International Securities.

"It is very difficult to cut the holdings of US Treasuries. With such huge foreign exchange reserves, if you don't invest in US debt, it is hardly possible to diversify them," Liu said.

China has set up a sovereign wealth fund, China Investment Corporation, to funnel the reserves into investments but it was proceeding slowly, she added.

"Despite the downgrade (in the US credit rating), the United States is still safer than Europe," Liu said.

The latest salvos from China came after ratings agency Standard & Poor's downgraded the United States to an AA+ rating from AAA, on political risk and a rising debt burden.

US officials have also made the case that despite the downgrade and a political showdown that drove the United States to the edge of default, the country remains one of the world's safest investments.

Analysts said that any sale of US dollar assets would also put pressure on China to allow its own currency to rise more sharply, something it has resisted out of fears of hurting its own exporters.

China scoops up US dollars from its massive exports and uses them to buy US bonds. A halt in dollar buying would put pressure on its own currency to rise, since it would reverse the trend of selling yuan to buy the US currency.

The United States has repeatedly called on China to allow its currency to appreciate more strongly against the US dollar and to undertake financial reforms.

But Beijing worries a stronger yuan would make its exports more expensive and therefore less competitive.

Michael Pettis, senior associate at the Carnegie Endowment for International Peace, saw little change in China's appetite for US Treasuries, since that would require a change in long-standing economic policy.

"They simply cannot stop and if they do, they will be doing what the US government has been trying to get them to do for several years," said Pettis, who is also professor of finance at Peking University.

China also risked the political wrath of other countries if it built up large stores of their bonds or currencies, meaning Beijing had few options besides US dollar investments, Pettis said.

"Neither Europe, nor Japan, nor anybody else will allow you to. If you buy too much of their currency, they will take trade action against you," he said.

Despite its impotence in the face of the US debt crisis, People's University professor Zhao Xijun said China's public fury would continue unabated as the rising nation asserted its perceived rights as an investor.

"China, as an investor, has the right to protect its interests," he told AFP.

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