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China won't dump US Treasuries or pile into gold
Agencies
Published: Jul 8 2010 10:00
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BEIJING - China's foreign exchange agency said Wednesday the country's $2.5 trillion reserves are not a "nuclear weapon" to control other nations and its vast holdings of US Treasury debt "should not be politicized."

In a question-and-answer statement on its website, the State Administration of Foreign Exchange ruled out the  option of dumping its vast holdings of US Treasury securities and called on Washington to be a responsible guardian of the dollar.

China is a responsible long-term investor and "doesn't seek the power to control recipients of its investment," the statement said, in an apparent effort to allay concerns in the outside world that arise whenever Beijing shifts its holdings of US government debt.

"Any increase or decrease in our holdings of US Treasuries is a normal investment operation," SAFE, the arm of the country's central bank said.

The agency constantly adjusts its portfolio to maximimize returns, and any changes to its US Treasury portfolio should be seen in that light and not interpreted politically, according to the SAFE statement.

"The US Treasury market is the world's largest government bond market, and US Treasury bonds deliver fair good security, liquidity and market depth with low transaction costs.

US bond market was an important market for China's foreign reserves, the SAFE statement said.

China held $900.2 billion in US Treasuries at the end of April, according to US Treasury data released on June 15.

In response to a question on whether China's $2.45 trillion stockpile of foreign currency could be used as an "atomic weapon".

"Facts have proven that such worries and concerns were definitely unnecessary," the regulator said.

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