BEIJING, Jan 10 (Reuters) - China should further diversify its huge foreign exchange reserves away from U.S. government debt to reduce its risk exposure, a central bank official said in comments published on Monday.
“We should change the single-currency focus on buying U.S. Treasuries and adopt a more diversified structure for foreign exchange reserves to reduce risk,” Xu Nuojin, deputy-director of the People’s Bank of China in Guangzhou, was quoted as saying by the Securities Times.
China should channel more of its foreign exchange reserves into resources and equities, Xu said.
Analysts estimate that about two-thirds of the reserves, which hit a record $2.65 trillion at the end of September, are parked in dollar assets, although the currency composition is a state secret.
Xu also urged the government to relax capital controls to enable companies to hold more foreign exchange earnings, which he said would help slow the rapid build-up in official currency reserves.
A slower rise in reserves could take some heat off the central bank when it sets monetary policy, he said.
The People’s Bank of China has been under pressure to mop up excess liquidity generated by its heavy-handed intervention to keep the yuan stable, analysts say. (Reporting by Kevin Yao; Editing by Chris Lewis)