PBOC Adviser Says China Needs Urgent Review of U.S. Holdings, News Reports
China should urgently assess risks from being the main foreign investor in U.S. debt and diversify its foreign-currency reserves more quickly, the Financial News reported today, citing Xia Bin, a central bank adviser.
In the short term, China can adjust the structure of the reserves, the central bank publication cited Xia as saying. Longer-term, the key is to keep foreign-exchange holdings at a “reasonable” level, according to Xia, an academic member of the monetary policy committee of the People’s Bank of China.
Central bank Governor Zhou Xiaochuan pledged this month to “closely” monitor U.S. efforts to tackle its debt burden. The global stock market rout that saw Tokyo shares sliding this morning follows Standard & Poor’s downgrade of the U.S. debt rating from AAA and a widening of Europe’s sovereign-debt crisis.
China is the biggest foreign owner of U.S. Treasuries, with more than $1 trillion of the securities, and its foreign- exchange reserves are the world’s largest at more than $3 trillion.
The U.S. economy has entered a long cycle of economic weakening that will put pressure on China’s holdings of dollar assets, Xia wrote in a microblog on Aug. 6. He is the director of the Finance Research Institute at the Development Research Center of the State Council, China’s cabinet.
China should buy more non-financial assets with its reserves to diversify risks, Xia wrote, adding that the country should also pursue national strategic interests, and seek to globalize the yuan. He previously said that China should use its reserves to increase holdings of gold and some other precious metals.
To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at +86-10-6649-7560 or lzheng32@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at +852-2977-6603 or ppanckhurst@bloomberg.net
People's Bank of China Adviser Xia Bin
Nelson Ching/Bloomberg
People's Bank of China Adviser Xia Bin.
People's Bank of China Adviser Xia Bin. Photographer: Nelson Ching/Bloomberg
Aug. 10 (Bloomberg) -- Johanna Chua, Hong Kong-based head of Asian economic research at Citigroup Inc., talks about China's economy, central bank monetary policy and currency. Chua also discusses Standard and Poor's decision to downgrade U.S. debt, and Federal Reserve monetary policy. She speaks with Rishaad Salamat, Susan Li and Phillip Yin on Bloomberg Television's "Asia Edge." (Source: Bloomberg)
People's Bank of China Governor Zhou Xiaochuan
Andrew Harrer/Bloomberg
People's Bank of China governor Zhou Xiaochuan.
People's Bank of China governor Zhou Xiaochuan. Photographer: Andrew Harrer/Bloomberg
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