Abstract:The United States has the largest national debt market in the world while China is the largest foreign share holder of the U.S. national debt. This paper analytically points out that, should the Chinese government reduce its holding of the U. S. national debt, such reduction might either back fire and harm its own economy, or be irrational because of lack of better investment opportunities elsewhere in the world. On the contrary, if one of Chinas economic goals is to appreciate or at least maintain the value of Chinas vast amount of foreign exchange reserve, then China may want to consider to increase its holding of the U.S. national debt. To change the current situation of Chinas huge holding of the United States national debt, it would depend on Chinas realization of economic balance by adjusting its own economic structure in the next wave of economic reforms.