We all know the US flogs its debt to anyone willing to buy it. And up until recently, that's been China.

Very slowly, over the past twelve months China has been lowering its exposure to US treasuries. In fact, in the last twelve months, they've offloaded about USD$100 billion dollars worth.

Some of this has been by simply not purchasing more bonds upon maturity. While some of it has been by turning those US dollars into precious resources. Instead of waiting for bonds to mature, it has used the cash to buy up natural gas stores, investing in oil rigs and even throwing money into companies with large iron ore mines.

But now, it looks like China has more interest in the financially crippled Euro, instead of building up its supply of greenbacks.

In fact a former advisor to the central bank of China has been told by a top level Chinese central banker to convey to the European central banks the 'confidence that China has in the region's economy and currency.'

Why does it have so much confidence in the currency now?

Firstly, Euro holdings are offering a far better yield than the US, which means solely as an investment, it's make much more sense to go with the product that offers a higher return.

Now you might be tempted to consider this a risky move by investing more money in the Euro rather than the traditional 'international currency' US dollars.

But what if the central bankers understand something we don't, or more importantly, America doesn't get?

And that is, America is no longer a sound investment.

It could be that Chinese central bankers have decided that should the US fall apart financially, they no longer want to risk their US currency reserves, which is more than 30% of their total foreign reserves.

From the very start of the 'naughties', China sought to grow its foreign currency interests. What started out as a lazy USD$181 billion in 2002, grew to over USD$1 trillion by 2008. Of course, the US dollar/Yuan having a favourable exchange rate only helped these purchases...

And now, China has passed Japan as the largest holder of long term debt in the States, currently holding a massive USD$843 billion.

Coming in second is Japan, with a massive USD$800 billion of US debt and the UK has the third largest amount of American debt at USD$362 billion.

Let's be honest, none of these countries are in the position to pick up the debt as China slows down it's buying of US debt.

As I mentioned earlier, Japan is already up to the eyeballs in their own debt and so isn't likely to go on a US bond buying spree. And the UK has promised fiscal austerity, so loading up on another country's treasuries with a record low yield probably isn't going to make much sense.

See, during those boom times, when public debt didn't matter, America knew that it could issue debt and would have a very willing buyer... China.

That's starting to change.

At the start of this year, the massive level of public debt held by China set off alarm bells with some US government officials. Even so, China still made another USD$30 billion in purchases before the Chinese government decided to start slowing the purchases down.

There are massive implications for America now that China has decreased its holdings. Any reduction in holdings by China could see overall demand for American debt drop. If it hasn't already.

And think about it. What if China becomes the world's largest economy and shuns the US as an investment vehicle? Would you be inclined to follow China's lead and dump US dollars and US investments too?

A casual dumping of American Treasuries will inevitably lead to an even weaker US dollar. Which eventually can only encourage other investors, and countries to seek out a new reserve currency.

Let's face it, right now there's no other country that can pick up the US debt like China can. But China's new found interest in the Euro could be about more than just better investment yields. It could just be the next step in the shift of economic power.