In recent months the US government's budget deficit has widened thanks in part to the Obama administration's costly stimulus plan.
Our correspondent in Shanghai says that China is worried about this, and fears the stimulus efforts will fuel inflation in the US, reducing the value of the dollar.
This would then erode the value of the debt China holds in the US currency.
In June, China cut its holdings of US securities by about $25bn, a fall of 3.1%.
Things are about to get a whole lot worse.
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