Japan's move into the top spot came as it also cut its U.S. Treasuries stake, although by a far-smaller amount, about $4.5 billion, to $1.132 trillion in October. Its holdings have fallen by about $17.3 billion from the previous October.
Japan's holdings eclipsed China's for just one month in February 2015, the first time since the 2008-2009 global financial crisis.
"China has been selling dollars to keep the yuan steady while Japan is very happy to let the yen depreciate," said Chester Liaw, an economist at Forecast Singapore.
Economists say they expect China to continue to reduce its holdings of U.S. government debt, considered as the most liquid dollar assets, to help defend the yuan, but a big sell-off looks unlikely.
The yuan fell to its weakest level against the U.S. dollar in more than eight years on Thursday, after the Federal Reserve's rate rise and outlook.
"China has been consciously cutting its holdings of U.S. Treasuries, to defend the yuan, and it's hard to stop this trend," said Zhou Hao, Singapore-based economist with Commerzbank.
China's foreign exchange reserves, still the world's largest, have fallen by $942 billion from a peak hit in June 2014, to a six-year low of $3.052 trillion in November, a drop of 24 percent. Meanwhile, China has reduced its U.S. Treasury holdings by $111 billion between June 2014 and September this year, a drop of 9.0 percent.
The PBOC is likely to spend more of its reserves to support the yuan, although it's walking on a tightrope, seeking to slow the yuan's descent while trying to preserve the reserves by reducing capital outflows through tighter controls.
Some traders believe the $3 trillion mark is a key psychological level for the PBOC, but it risks rapidly churning through its remaining stockpile of reserves if the U.S. dollar keeps climbing and Beijing has to fight to steady the yuan.