WASHINGTON (AFP) - Chinas holdings of US government debt dropped for the first time in three months in May, official data showed Friday. The cash-rich Chinese government reduced its US Treasury bond holdings to 867.7 billion dollars from 900.2 billion dollars in April, the Treasury said in a report on international capital flows. China, the worlds largest holder of foreign-exchange reserves, had raised its holdings in the prior two months from a 2010 low of 877.5 billion dollars in February. Still, China remained far ahead as the top foreign debt holder, followed by Japan, which also pared its holdings, to 786.7 billion dollars from 795.5 billion in April. Third-placed Britain increased its holdings to $350.0b from 321.2b in April. Overall, net Treasury international capital (TIC) flows fell 57pc to 35.4 billion dollars in May, the data showed, suggesting easing concerns about the European debt crisis. The May TIC data along with the latest US trade results point to less upward pressure on the greenback, which is good news for American exporters, said Tu Packard at Moodys Economy.com. However, the outlook can change on a dime during this period of transition and considerable uncertainty. The sovereign debt crisis in Europe still simmers, and the Fed has revised down its 2010 growth forecast. The Federal Reserve on Wednesday lowered its 2010 growth forecast for the worlds largest economy, to 3.0 to 3.5pc, from the 3.2-3.7pc range predicted just months ago. In March, net TIC flows hit a record 141.4 billion dollars as investors around the world pulled capital from the eurozone on concerns that bloc member Greece was on the brink of a sovereign debt default. The crisis, which sent the euro to four-year lows against the dollar, also deterred China and several other countries with massive foreign reserves from diversifying away from US bonds and other long-term US securities, experts said. China has repeatedly criticized the United States for its snowballing debt levels, fearing that its investment in US government bonds could turn sour if a debt crisis emerges.