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Chinese Official: Don't Buy U.S. Bonds

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  • Chinese Official: Don't Buy U.S. Bonds

    Tue Apr 4, 6:00 AM ET

    HONG KONG - China should stop buying U.S. Treasuries and take steps to reduce its holdings in those bonds, a Hong Kong newspaper on Tuesday quoted a high-ranking Chinese official as saying.

    China should instead increase imports from the United States, said Cheng Siwei, a vice chairman of China's parliament, the National People's Congress, the Wen Wei Po reported.

    Currency traders said the report caused some players to sell the U.S. dollar, prompting the currency to pull back from earlier gains. The dollar was trading at 117.68 yen Tuesday afternoon in Tokyo, up 0.03 yen from late Monday in New York.

    Analysts estimate that China invests about three-quarters of its foreign currency reserves which last year rose to $818.9 billion in U.S. Treasuries.

    Cheng, who spoke at a conference in Hong Kong, also said that U.S. restrictions on some high-tech, high-value exports to China have contributed to the trade imbalance between the two nations, the Chinese-language paper said. Last year, the U.S. reported a $202 billion trade deficit with China, a record with any country.

    The official said that the short-term strategy for the Chinese currency's regime is to widen the yuan's trading band at an appropriate time, while keeping the currency stable and avoiding a buildup in foreign reserves, the paper reported.

    In the long term, Cheng said the goal for the yuan is to reach full convertibility, though there is no timetable, the paper reported.

    China's central bank said Tuesday that Cheng's remarks on the country's use of its foreign exchange reserves and yuan reform are his own and not representative of the bank's position.

    Last July, China revalued the yuan, raising its value by 2.1 percent against the dollar and allowing it trade in a restricted float. Still, the government exerts a great deal of control over the yuan's value, and it has appreciated only about 1 percent since that time.

  • #2

    Brad Stetser has a good blog about China and it's power over the US economy.


    • #3
      Until China becomes democratic it can't make its currency convertible. You have to be able to trust the government before you can accept is promise to pay. You can't trust communists.

      They are waiting until all the old ones die off so they can change the government. It will take another 10 years.