Investors worry that if China purchases fewer Treasuries, the USA government will have to find alternative buyers.
China's foreign-exchange reserves of $3.1 trillion are the world's largest, though it wasn't clear whether the recommendations have been adopted.
"It's hard to see how China would emerge from this scenario better off", said Mark Williams chief Asia economist at research firm Capital Economics.
The $14 trillion Treasury market has been roiled in the past 48 hours. "But that correlation has broken apart fantastically over the last couple of days", he said. "It's challenging to find any real substantial alternatives", with China earning dollars - the flip side of the US current account deficit. "I don't think we're headed for investment Armageddon".
China is diversifying its foreign exchange reserves in order to safeguard their value, the country's currency regulator said, while dismissing a media report the government is halting or reducing its purchases of United States debt, Reuters reports.
Wen's comments in March 2009 came weeks after Secretary of State Hillary Clinton had urged China to keep buying Treasuries while on a visit to Beijing. Trump is facing decision time as deadlines approach over whether to slap tariffs on imports from steel and aluminum to solar panels, which would be clearly aimed at China.
Later that month, Hu Xiaolian, director of China's SAFE, said Treasuries form "an important element of China's investment strategy for its foreign-currency reserves".
The greenback extended losses after data showed US producer prices fell for the first time in almost 1-1/2 years in December amid declining costs for services.
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The stakes may be higher now as tensions with the US have been building since the election of President Donald Trump, who's been critical of the American trade deficit with China and other countries.
BMO suggests buying 10-year Treasuries if yields climb to 2.6%.
The dollar then rallied and was up 0.4 percent against the yen, although the US currency is still down more than 1 percent against the yen this week after markets bet the Bank of Japan (BoJ) could start to tighten monetary policy faster than expected.
Some market experts speculate that China might want to send a message to President Trump over trade.
Brent has gained 5 percent since the beginning of the year, picking up from its late-year surge.
The Janus Henderson manager said his $2.2 billion Global Unconstrained Bond Fund had taken a short position on Treasuries, U.K. gilts and German Bunds.
The Gordon Brown example highlights why Commonwealth Bank of Australia is saying Wednesday's reports over China and its US Treasury holdings are unreliable.
The BOJ maintained the amount of its bond purchases on Thursday, helping to soothe a market rattled by its reduction earlier this week.