China to keep buying U.S. Treasuries: report

BEIJING Mon Sep 19, 2011 9:22pm EDT

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BEIJING (Reuters) - China, the largest foreign holder of U.S. government debt, will keep buying U.S. Treasuries, the official People's Daily, the ruling Communist Party's mouthpiece reported on Tuesday, citing government researchers.

In an article about the reasons for China's increased purchase of U.S. Treasuries, the newspaper cited Yan Xiaona, a researcher with the Chinese Academy of Social Sciences, as saying that the dollar "is relatively safer than the euro" because of the unfolding sovereign debt crisis in Europe.

Yan was quoted as saying that dollar-denominated assets remained attractive for investors around the globe.

Wang Chaocai, a Ministry of Finance researcher, was quoted as saying that "what else we can buy if not U.S. Treasuries? It's more risky to buy into equities."

China's State Administration of Foreign Exchange, the agency that manages China's $3.2 trillion foreign exchange reserves, is under pressure to accelerate the diversification of the world's largest stockpile of foreign exchange reserves.

The details of China's reserve is a state secret, but independent economists estimate that two thirds of the reserves are in dollar-denominated assets.

Zhu Ying, a university professor in Shanghai, was quoted by the People's Daily as saying that China could hold up to $3 trillion in U.S. treasuries in its reserves by 2015.

(Reporting by Zhou Xin and Kevin Yao)

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Comments (2)
China_Lies wrote:

They have to keep buying US treasuries!!! Where else are they going to stick their money? In a bank account? LOL! Inflation over in China being over 6%, and they think they can stick that much money in a < 0.5% yield savings account. LMAO!!!

Plus, as soon as they start selling their treasuries, the value falls through the floor.

China has painted themselves into a corner. They have to keep buying treasuries to maintain the value of their current holdings.

Poor investment planning, if you ask me.

p.s. don’t believe all the foolishness about China holding the US by the balls. Chinese treasury holdings represent 8% of total US debt. ONLY 8%!!! Last time I checked, an 8% shareholder shouldn’t be talking as loud as China is currently talking.

Sep 19, 2011 10:34pm EDT  --  Report as abuse
NukerDoggie wrote:
An additional, powerful reason why China MUST keep buying Treasuries (or at least keep buying dollars) is that it has to keep the yuan artificially low against the dollar to facilitate its export-based economy. If it doesn’t mop up the excess dollars the yuan rises. Can’t let that happen until its economy becomes less dependent upon exports.

All this doesn’t preclude China from spending (converting) an increasing portion of its Treasuries and/or dollars into hard assets, and loaning dollars to friends and allies, or buying all manner of stuff (like property, companies, etc) in the U.S. and other western nations, though. So, its true dollar-percentage of its > $3 trillion holdings is really tough to estimate. It can diversify while continuing to buy Treasuries, therefore.

China’s “predicament” isn’t quite as bad as the experts paint it to be, therefore.

Sep 19, 2011 12:23am EDT  --  Report as abuse
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