China, the biggest buyer of U.S. Treasury debt, increased its holdings in May for the second straight month, after five months of declines.
China boosted its holdings by $7.3 billion to $1.16 trillion, the Treasury Department said Monday.
Total foreign holdings of Treasury securities rose 0.6 percent to $4.51 trillion.
The report shows that foreign investors didn't lose their appetite for U.S. government debt in May, even though the U.S. reached its $14.3 trillion borrowing limit that month.
The limit is the total amount the government can borrow to finance its operations. Since reaching the limit May 16, the Treasury has relied on accounting maneuvers to avoid running out of cash. But Treasury says it will have exhausted those maneuvers by Aug. 2.
If the borrowing limit isn't increased by then, Treasury Secretary Timothy Geithner says, the government will default on its obligations.
Congressional Republicans have demanded large spending cuts as a condition for voting in favor of raising the limit. President Barack Obama has pushed to include some tax increases on wealthier Americans, which Republicans have adamantly opposed.
The standoff has persisted for weeks, spurring warnings from Federal Reserve Chairman Ben Bernanke and leading investors on Wall Street that a default would be disastrous for the U.S. economy.
Republicans in the House and Senate are taking different tacks this week. Senate Minority Leader Mitch McConnell, R-Ky., has proposed allowing Obama to raise the debt limit unilaterally, though Congress could vote to disapprove the increase.
House Republicans, meanwhile, are pushing legislation that would dramatically cut spending, exclude tax increases, and add a balanced-budget amendment to the Constitution.
Japan and the United Kingdom, the second and third largest holders of U.S. debt, also both increased their ownership of Treasurys in May.
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