Trading guru Dennis Gartman brings up the issue in his newletter:
The simple truth is that China reduced its holdings of US treasury securities more in April than it has at any time in at least seven years according to the Shanghai Securities News of earlier this week. We tend to believe that, for this is not news that is beneficial to China, and so when we read the report we were struck by that fact. Further, the US Treasury reported that China reduced, net, its holdings of treasuries by $5.8 billion. This is the first such net reduction in its holdings of US Treasuries by China since October of ’05. We do not take this lightly, nor should anyone else, for although Japan remains the largest holder of US treasury securities with $615 billion as of the end of April, China is second with $414 billion in April, down from $419.8 billion in March.
It is unclear wheter they sold securities or let old ones expire and didn’t replace them. Regardless, both could bring the market lower.