This snippet is making the rounds...

...but we will see again the large gulf that separates these types of PR moves with actual action taking place. While there may be some element of truth here, I find it difficult to believe that shifting into Treasuries and Agencies exclusively is either wise or prudent since China has expressed considerable interest in physical asset-backed instruments.

That being said, their appetite for U.S. Government debt will continue unabated...it has to, or they risk everything.

China Dumps US Asset Backeds and Corporates
February 9th, 2010
By David Goldman

Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE), nor at China’s large commercial banks. The Chinese government has ordered its reserve managers to divest itself of riskier securities and hold only Treasuries and US agency debt with an implicit or explicit government guarantee. This already has been communicated to American securities dealers, according to market participants with direct knowledge of the events.

It is not clear whether China's motive is simple risk aversion in the wake
of a sharp widening of corporate and mortgage spreads during the past two
weeks, or whether there also is a political dimension. With the expected
termination of the Federal Reserve's special facility to purchase
mortgage-backed securities next month, some asset-backed spreads already
have blown out, and the Chinese institutions may simply be trying to get out
of the way of a widening. There is some speculation that China's action has
to do with the recent deterioration of US-Chinese relations over arm sales
to Taiwan and other issues. That would be an unusual action for the Chinese
to take-Beijing does not mix investment and strategic policy-and would be
hard to substantiate in any event.