NEW YORK ( TheStreet) -- Data released by the Treasury Department on Wednesday morning indicated that with the Fed's $972 billion in Treasury holdings it has surpassed China's $906 billion in Treasury securities. And with more QE2 purchases on the horizon, the Fed lead over China in the U.S. paper race is likely to be extended. The Treasury data on China's total Treasury holding exposure is on a two-month lagging basis, as of October 2010. China has been selling longer-term bonds and focusing on shorter-term issues recently, a trend that was evident in the October numbers also. As for Japan, even as its total exposure to Treasury securities increased in October to its highest level in a year -- and China remained the largest foreign holder of Treasury paper -- Japan was close to overtaking China for second place, while the Fed pulled away from both. Market analysts and economists were saying that the most recent Treasury buying data showed less enthusiasm from foreign participants for the U.S. government paper, especially the longer-term bonds. For months, Fed hawks have been expecting the Fed versus China event to occur, given the rapacious buying of government securities that has become synonymous with Fed policy. Still, if it was a fait accompli for the Fed to overtake China as the king of treasury holdings, it's in the least another notable moment in the long-running debate over whether the Fed's actions are leading the U.S. down a path of inflation and speculative asset bubbles. "I'm not one of those people worried about China holding too much debt or the Fed exceeding an arbitrary benchmark, but the data shows how big the Fed has become in this market, and the market distortions that Fed buying is causing," said Nicole Gelinas, a scholar at the Manhattan Institute and one of the signers of a recent high-profile open letter sent to the Fed by think tank e21 that criticized its monetary policy. The Manhattan Institute scholar said the real concern should be a Fed monetary policy that is hiding the truth of a financial system that is still broken. "It's not just Treasury securities but mortgage securities and everything that the Fed is buying," Gelinas said.