CHINA warned yesterday that it would not keep lending money to the United States indefinitely, even as new data showed it had consolidated its position as the top buyer of American government bonds.

Said China Daily in an editorial: 'China's increased purchase of US Treasury securities should not be interpreted as an endorsement of the assumption that the US can borrow its way out of the current financial crisis.'

The warning from the state-run newspaper - an English-language daily that mainly addresses a foreign audience - came after the US Treasury Department reported a steep increase in Chinese holding of US Treasury bonds.

China held US$652.9 billion (S$952.3 billion) of US Treasury bonds at the end of October - up 11.2 per cent from US$587 billion a month earlier, when China became the largest creditor ahead of Japan, according to the data released on Tuesday.

Japan remained in second place, with total holdings of US$585.5 billion at the end of October. China Daily acknowledged that, given the global economic crisis, the consequences would be serious if China and other nations stopped channelling money into the US economy.

However, the US should also use the window of opportunity to undertake necessary reforms, the newspaper said.

'The current strong foreign appetite should not be taken by the US government as solid proof of the long-term value of its Treasury bonds,' it said.

'Instead, it should race against time to undertake painful but critical reforms to revive its economy before such demand peaks any time soon.'