HONG KONG — Reversing its role as the world’s fastest-growing buyer
of United States Treasuries and other foreign bonds, the Chinese
government actually sold bonds heavily in January and February before
resuming purchases in March, according to data released during the
weekend by China’s central bank.

Cutting Back

China’s foreign reserves
grew in the first quarter of this year at the slowest pace in nearly
eight years, edging up $7.7 billion, compared with a record increase of
$153.9 billion in the same quarter last year.

China has lent
vast sums to the United States — roughly two-thirds of the central
bank’s $1.95 trillion in foreign reserves are believed to be in
American securities. But the Chinese government now finances a
dwindling percentage of new American mortgages and government borrowing.

In the last two months, Premier Wen Jiabao
and other Chinese officials have expressed growing nervousness about
their country’s huge exposure to America’s financial well-being.

Chinese reserves fell a record $32.6 billion in January and $1.4
billion more in February before rising $41.7 billion in March,
according to figures released by the People’s Bank
over the weekend. A resumption of growth in China’s reserves in March
suggests, however, that confidence in that country may be reviving, and
capital flight could be slowing.

The main effect of slower bond
purchases may be a weakening of Beijing’s influence in Washington as
the Treasury becomes less reliant on purchases by the Chinese central
bank.

Asked about the balance of financial power between China
and the United States, one of the Chinese government’s top monetary
economists, Yu Yongding, replied that “I think it’s mainly in favor of
the United States.”

He cited a saying attributed to John Maynard Keynes: “If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.”

Private investors from around the world, including the United States,
have been buying more American bonds in search of a refuge from global
financial troubles. This has made the Chinese government’s cash less
necessary and kept interest rates low in the United States over the
winter despite the Chinese pullback.

There have also been some
signs that Americans may consume less and save more money in response
to hard economic times. This would further decrease the American
dependence on Chinese savings.

Mr. Wen voiced concern on March
13 about China’s dependence on the United States: “We have lent a huge
amount of money to the U.S. Of course we are concerned about the safety
of our assets. To be honest, I am definitely a little worried.”

The main worry of Chinese officials has been that American efforts to
fight the current economic downturn will result in inflation and erode
the value of American bonds, Chinese economists said in interviews in
Beijing on Thursday and Friday.

“They are quite nervous about
the purchasing power of fixed-income assets,” said Yu Qiao, an
economics professor at Tsinghua University.

Economists said
there was no sign that the Chinese government had deliberately
throttled back its purchases of overseas bonds to punish the United
States for pursuing monetary and fiscal policies aimed at stimulating
the American economy.

While those policies may run a long-term
risk of setting off inflation, they also may benefit China if they
rekindle economic growth in the United States and thereby revive
China’s faltering exports.

The abrupt slowdown in China’s
accumulation of foreign reserves instead seems to suggest that
investors were sending large sums of money out of mainland China early
this year in response to worries about the country’s economic future
and possibly its social stability in the face of rising unemployment.

Evidence of such capital flight included a flood of cash into the Hong
Kong dollar. Mainland tourists were even buying gold and diamonds
during Chinese new year holidays here in late January.

China’s reserves have soared in recent years as the People’s Bank
bought dollars on a huge scale to prevent China’s currency from
appreciating as money poured into the country from trade surpluses and
heavy foreign investment. But China’s trade surpluses have narrowed
slightly as exports have fallen, while foreign investment has slowed as
multinationals have conserved their cash.

Jun Ma, a Deutsche Bank
economist in Hong Kong, predicted that China’s foreign reserves would
rise only $100 billion this year after climbing $417.8 billion last
year.

Some economists contend that slower growth in Chinese
foreign currency reserves is not important to the economic health of
the United States, even though it may be politically important. In the
first quarter, instead of the Chinese government sending money out of
the country to buy foreign bonds, Chinese individuals and companies
were buying many of the same bonds.

“The outflow would mostly
end up in the U.S. anyway,” even if China is no longer controlling the
destination of the money, said Michael Pettis, a finance professor at
Peking University, in an interview on Thursday.

Heavy purchases
of Hong Kong dollars by mainland Chinese residents early this year also
have the indirect effect of helping the United States borrow money. The
Hong Kong government pegs its currency to the American dollar, and
stepped up its purchases of Treasury bonds this winter in response to strong demand for Hong Kong dollars.

But China’s economy appears to be bouncing back from the global
economic downturn faster than its trade partners’ economies. If that
proves true, the result could be an increase in imports to China while
its exports recover less briskly. This would limit trade surpluses and
leave the People’s Bank with less money to plow into foreign reserves.