China and other governments have little choice but to keep buying U.S. Treasury debt to store swelling foreign reserves even after Washington's credit rating was cut by Standard & Poor's.
Some governments such as Germany and Australia have stronger credit ratings than the United States following Friday's downgrade to AA+ from AAA. But they don't sell enough debt to absorb the mountains of cash that China, Japan and others stockpile. Shifting money to stocks might offer a better return but can be politically volatile _ and high risk as current market turmoil shows.
"The feasible choices are very limited," said Jun Ma, Deutsche Bank's chief China economist. "Either some markets are too small or those markets are bigger risks than the U.S. Treasury."
Governments from China to Switzerland to Mexico have poured billions of dollars from exports, oil sales and other sources into Treasury debt, boosting foreign ownership to $4.5 trillion as of April.
Asian holdings, especially China's, soared over the past decade as trade boomed and central banks amassed reserves to cushion against shocks such as a repeat of the 1997 Asian financial crisis. Beijing became Washington's biggest foreign creditor with $1.1 trillion in Treasury debt as it bought dollars to regulate the value of its own currency, the yuan.
The flood of cash helped to finance U.S. budget deficits but fueled unease abroad about relying on a single asset and calls for central banks to shift money to other bonds or even gold or commodities such as copper.
"I think we should greatly reduce our holdings of U.S. bonds," Guan Jianzhong, chairman of a little known Chinese rating agency, Dagong Credit Rating Co., told the prominent Chinese business newspaper 21st Century Business Herald this week.
Even before the latest U.S. debt turmoil, Beijing said it planned to move more of its $3.2 trillion in reserves into other assets to reduce reliance on Treasurys. The makeup of China's reserves is secret but analysts believe it is about 60 percent dollar-denominated assets, with the rest mostly in euros and yen.
China's central bank governor affirmed that strategy last week after American leaders agreed to raise Washington's borrowing limit. But he gave no indication the bank might speed up a process that analysts say is likely to take years.
Beijing's Treasury holdings are so vast that selling more than a fraction abruptly could shake markets, affecting interest rates and the value of the dollar. That might backfire by hurting the American economy and demand for Chinese exports.
For other governments, no other market is large or stable enough to accommodate demand for a low-risk haven to park reserves.
"I think it is still a safe investment. Remember that it is still AA+," Philippine central bank deputy governor Diwa Guinigundo told The Associated Press. "At the same time, the U.S. dollar remains the international currency and dollar assets remain the most liquid."
South Korea expects no "sudden change" in its reserve management, said a deputy finance minister, Choi Jong-ku. Seoul has the world's seventh-largest foreign reserves and $32.5 billion in Treasury debt.
"There is no alternative," Choi told The AP.
That was demonstrated Monday. Jittery traders in the United States rushed to buy Treasurys, pushing up prices as stock markets plunged following the S&P downgrade that jolted the global financial system and added to fears of an economic slowdown.
Taiwan's central bank, which owns $153.4 billion worth of Treasury securities, reacted skeptically to S&P's downgrade. It noted that securities that were given AAA ratings by S&P and other ratings agencies turned out to be toxic and "caused substantial losses" as the 2008 global financial crisis unfolded.
"This shows their credibility is dubious," the bank said in a statement.
Government debt in euros is the second-biggest market and a possible alternative. But rising doubts about whether Spain, Italy and other European governments can repay bondholders might put off savers who want safety.
Some governments might shift some money to buying foreign stocks, which can offer a higher return than safe but low-yielding Treasurys.
Beijing has done that by putting several hundred billion dollars into a sovereign wealth fund. But that fund sticks to buying small stakes in companies to avoid arousing political tensions in economies where Chinese investment can be sensitive. The added spending needed to absorb more of Beijing's money would require buying larger stakes that might trigger a backlash.
Japan, the second-biggest foreign owner of Treasurys, also is constrained by a need to show solidarity with Washington, its main military ally, analysts say. More than 90 percent of its $1.1 trillion in reserves is believed to be in dollars.
Japan had $912.4 billion in Treasury debt at the end of May, according to U.S. government data, but the Finance Ministry says that also includes private sector holdings. The ministry does not disclose details of its holdings.
"All Japan can say now is that it will continue to buy U.S. Treasuries," said Yuji Shimanaka, chief economist at Mitsubishi UFJ Morgan Stanley Securities Co. "This is about the U.S.-Japan alliance. This simply can't be changed."
Some Chinese commentators also have suggested Beijing might move money into gold or into commodities such as copper that its economy needs.
But such options can absorb only a fraction of China's reserves, which rose by more than $950 billion _ equal to more than the entire reserves of No. 2 Japan _ over the year ending in June. Beijing has piled up the money as it buys most dollars that enter China to restrain the rise of the yuan.
China and other governments can shift money to other assets but the move has to be gradual, said Deutsche Bank's Ma.
"In the long run, it is feasible, if you do it over years or decades," Ma said. "But not within a matter of weeks."
AP Business Writers Yuri Kageyama in Tokyo and Kelly Olsen in Seoul, South Korea and Associated Press writers Debby Wu in Taipei and Teresa Cerojano in Manila, Philippines contributed.