By Ariana Eunjung Cha
Washington Post Foreign Service
Friday, March 13, 2009; 11:17 AM

SHANGHAI, March 13 -- Chinese Premier Wen Jiabao said Friday that he is "worried" about the country's vast $1 trillion holdings in U.S. Treasuries and that China will pursue a policy of diversification when comes to its future foreign exchange holdings.

Wen's remarks, which were made at the close of the annual National People's Congress meeting in Beijing, echoed those that have been made by other high-ranking policymakers and bankers over the past year since the subprime crisis devastated the value of the mortgage-backed securities that made up a large chunk of China's U.S. holdings.

"We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried," Wen said.

At a number of diplomatic meetings since then, Chinese officials have raised the issue of U.S. Treasuries and have sought assurances the United States that it will do everything possible to maintain the stability of its economy. On Friday, Wen called on the Obama administration to "maintain its good credit, to honor its promises and to guarantee the safety of China's assets."

China does not release details about its foreign reserve holdings, but there has been growing evidence of its unease about those investments.

Starting last summer, China's big state-owned banks -- including Bank of China and Bank of Communications -- began dramatically reducing their holdings in Fannie Mae and Freddie Mac debt. In September, as what began as a U.S. problem began to spread around the globe, Ha Jiming, chief economist for the China International Capital Corp., warned in a report that Chinese government officials have realized that it's a "bad idea to put all their eggs in one basket." At that time, China had held a fifth of its currency reserves in Fannie and Freddie debt.

This year, as Obama's administration has sold record amounts of debt to finance its economic stimulus packages, Treasuries have dropped. According to Merrill Lynch's U.S. Treasury Master index, investors lost an average of 2.9 percent in 2009.

Despite China's public comments, however, the government has continued to hold on to and even increase its overall U.S. Treasury holdings since the U.S. economic problems began. In September it surpassed Japan as the No. 1 overseas holder of Treasuries, which, because they are backed by the U.S. government , are widely considered safer investments at a time of global economic uncertainty.

And at the end of last year, China held about $696 billion in U.S. government securities; that's 46 percent more than at the end of 2007.

Wen said as much on Friday when he emphasized that despite his concerns he believes that "our foreign reserves in general are safe."

Researcher Wang Juan in Beijing contributed to this report.