A cleaner wipes down a monitor displaying the Korea Composite Stock Price Index. China's net purchases of South Korean Treasury notes totaled 444 billion won ($395 million), 23 percent more than in December 2009. [Photo / Agencies]

SEOUL, South Korea - China boosted its holdings of South Korean bonds last month even as lawmakers in Seoul reinstated a tax on interest income from debt securities.

China's net purchases of Korean Treasury notes totaled 444 billion won ($395 million), 23 percent more than in December 2009, South Korea's Financial Supervisory Service said.

The addition more than tripled China's holdings of South Korean fixed-income securities to 6.57 trillion won at the end of last year. Net outflows by overseas investors were a record 5.3 trillion last month.

"China was a net investor every month last year," the statement said. "We believe the record net outflows came from several factors, including the passage of a foreigner bond tax, the European debt crisis, a stronger dollar and year-end position adjustments."

South Korea's parliament passed a bill in December that revived a tax of as much as 14 percent on interest income from treasury and central-bank bonds and a 20 percent levy on capital gains from their sale.

Officials from Latin America to Asia have tried to slow fund inflows and curb gains in their currencies since last year to protect exporters.

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South Korean bonds fell for a fourth day on Thursday. The yield on the 4 percent notes due in September 2015 increased seven basis points to 4.27 percent as of 1:25 pm on Thursday in Seoul, the highest level since Aug 18. A basis point is 0.01 percentage point. The won rose 0.2 percent to 1,123.95 per dollar.

China is considering allocating more of its $2.65 trillion foreign-exchange reserves to emerging-market currencies to boost returns, central bank Governor Zhou Xiaochuan said in October.

The nation should expand investment of its reserves in bonds and stocks, Zhang Monan, an economics researcher with the State Information Center, wrote in a commentary published on China Daily on Dec 30.

China increased its holdings of US Treasuries for a fourth month in October to $906.8 billion, Bloomberg data show. The nation bought a net 262.5 billion yen ($3.1 billion) of Japanese bonds in October, Japan's Ministry of Finance said on Dec 8.

Bloomberg News