China's US holdings estimated at $1.7 trln-report

NEW YORK Feb 4 (Reuters) - China, which holds the world's largest foreign exchange reserves, was estimated to have $1.7 trillion in U.S. investments at the end of 2008, including Treasuries and equities, according to a recent report.

China's U.S. portfolio holdings equal just under 40 percent of its gross domestic product, according to the Council of Foreign Relation's Center for Geoeconomic Studies.

Brad Setser and Arpana Pandey, who co-authored the report, wrote that China held close to $900 billion of Treasury bonds (including short-term bills) at the end of the fourth quarter. It also owned between $550-$600 billion of agency bonds, another $150 billion in corporate bonds, $40 billion in U.S. equities, as well as $40 billion in short-term deposits.

In developing the breakdown of holdings and the overall $1.7 trillion estimate, the authors compared the Chinese data on holdings of foreign assets with U.S. data on China's holdings of U.S. assets. Both data sources, however, tend to understate China's true reserves and purchases of U.S. assets.

So they adjusted China's data for "hidden reserves" and likewise adjusted the U.S. Treasury International Capital data for China's purchases through London and Hong Kong.

China's end-2008 currency reserves rose to $1.95 trillion, by far the largest stockpile of foreign exchange in the world. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Theodore d'Afflisio)