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Is China’s love for Treasurys waning?

China sold almost $48 billion worth of U.S. Treasurys in December, the most in two years. A huge sum but not a sign that China is about to give up being the world's biggest foreign holder of Treasuries anytime soon, analysts say.

(Read more: Foreigners pare back on some US securities)

For years now there has been speculation that China, which has the largest foreign exchange reserves globally, would diversify away from its holdings of U.S. government bonds, perhaps towards Europe.

In this context, data Tuesday on the foreign holdings of U.S. securities was telling. China's holdings of Treasuries fell 3.6 percent to $1.27 trillion from the month earlier, the largest decline since December 2011, it showed.

Paul J. Richards | AFP | Getty Images

"The bulk of the $47.8 billion Treasuries sold by China was T-Bills, bonds with a maturity of up to one-year, so when you strip this out and that's roughly $43 billion, the number looks a lot less dramatic," said Sean Callow, a senior currency strategist at Westpac Bank.

"It's still interesting that at a time when China is drawing in lots of inflows and foreign exchange reserves are rising that it sold Treasurys at the same time," he added.

(Read more: How the big money is betting on gold)

Analysts say one reason for the heavy selling of U.S. bonds may have been a tactical move by Beijing to lock in profits as a scaling back of the Federal Reserve's asset-purchase program got underway in December, denting the appeal of the Treasury market.

They add the selling may also reflect some caution by central banks as they assess the impact of Fed tapering. The Fed scaled back its $85 billion-a-month stimulus program by $10 billion in December and by a further $10 billion in January.

Still, even as China sold some of its U.S. bond holdings in December, foreign buying meant that U.S. Treasurys saw a net inflow of $17.9 billion in the month after sales of $127 million in November, Reuters reported.

Who will buy Treasurys now?
Who will buy Treasurys now?

After China, Japan is the world's second biggest foreign holder of Treasurys with some $1.18 billion worth in December, down just 0.3 percent from November.

Yields on benchmark 10-year Treasurys hit 3 percent in December and have since fallen back to around 2.71 percent following weak economic data.

(Read more: Good time to buy bonds? 'Absolutely not')

"There's long been speculation that China will unwind its holdings of Treasurys, but we still see strong growth in China's foreign reserves and some of that money will still find its way into U.S. government bonds," said Shane Oliver, chief economist and head of investment strategy at AMP Capital.

China's foreign exchange reserves hit $3.82 trillion at the end of last year, up from $3.66 trillion at the end of September, data from the country's central bank last month showed.

"The data on holdings of U.S. Treasurys is volatile and I don't think it signals a significant change in direction from China," Oliver added. "China still has a huge current account surplus and on top of that, talk of U.S. money printing is slowing as the fed tapers, so the motivation to diversify out of U.S. assets is slowing."

— Writing by CNBC's Dhara Ranasinghe. Follow her on Twitter at @DharaCNBC