China to keep buying U.S. Treasuries: report

BEIJING Mon Sep 19, 2011 9:22pm EDT

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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