http://www.bloomberg.com/apps/news?pid=20601087&sid=a6KTPb8k2koY&refer=home
China âWorriedâ Over Safety of U.S. Debt, Wen Says (Update3)
Share | Email | Print | A A A
By Eugene Tang and Tian Ying
March 13 (Bloomberg) -- China, the U.S. governmentâs largest creditor, is âworriedâ about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said.
âWe have lent a huge amount of money to the United States,â Wen said at a press briefing in Beijing today after the annual meeting of the legislature. âOf course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of Chinaâs assets.â
China should seek to âfend off risksâ as it diversifies its $1.95 trillion in foreign-exchange reserves and will safeguard its own interests, Wen said. Chinese investors held $696 billion of U.S. Treasuries as of Dec. 31, an increase of 46 percent from the prior year.
Treasuries have dropped this year as President Barack Obama sells record amounts of debt to fund his $787 billion economic stimulus package. Merrill Lynch & Co.âs U.S. Treasury Master index shows the securities declined 0.5 percent last month, after falling 3.1 percent in January, the most since April 2004. The dollar has dropped 17 percent against the yuan since China ended a fixed exchange rate in July 2005.
Treasuries declined, causing the yield on the 10-year U.S. Treasury note to rise 3 basis points to 2.89 percent at 11:49 a.m. in Hong Kong, according to BGCantor Market Data. The yuan was little changed at 6.8380 per dollar. The Shanghai Composite Index of stocks climbed 0.7 percent.
Stable Yuan
âChina is worried that the U.S. may solve its problems with the fiscal deficit and banks by printing money, which will stoke inflation,â said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the countryâs second-biggest lender. âIf the U.S. can make sure this wonât happen, then China will continue to invest.â
U.S. Secretary of State Hillary Clinton urged China, while visiting officials in Beijing on Feb. 22, to continue buying U.S. debt, which she called a âsafe investment.â She didnât press China on its foreign-exchange policy, backing away from January comments by Treasury Secretary Timothy Geithner that the Chinese government manipulates its currency to boost exports.
China will maintain its policy of seeking a stable yuan, even as gains against the euro and Asian currencies hurt the nationâs exporters, Premier Wen said. Peopleâs Bank of China Governor Zhou Xiaochuan pledged last week to maintain yuan stability as investors pull money out of emerging-market assets because of slowing global economic growth.
Independent Policy
While the yuan has weakened 0.2 percent against the dollar this year, there has been a âdrastic depreciationâ in the euro and Asian currencies that has put a lot of pressure on Chinese exporters, Wen said. The currency has gained 8.6 percent against the euro this year and 6 percent against the Philippine peso.
âOur goal is to maintain a basically stable yuan at a balanced and reasonable level,â Wen said on the final day of the meeting of the National Peopleâs Congress. âAt the end of the day, it is our own decision and any other countries canât press us to depreciate or appreciate our currency.â
Collapsing exports have dragged the economy to its weakest growth in seven years and eliminated the jobs of millions of migrant workers. Wen reaffirmed Chinaâs target of an 8 percent expansion in 2009 as economies from the U.S. to Japan contract, saying the goal was âdifficult but possibleâ to achieve.
Stimulus Plans
China can add âat any timeâ to 4 trillion yuan ($585 billion) of stimulus measures to revive the worldâs third- biggest economy, Wen said. Gross domestic product expanded 6.8 percent in the fourth quarter, compared with 9 percent for all of last year and 13 percent for 2007.
âWe have reserved adequate ammunition,â Wen said, adding that the fiscal deficit is under control and the debt level still safe. âAt any time, we can introduce new stimulus.â
Yu Yongding, a former adviser to the central bank, said in an interview on Feb. 10 that China should seek guarantees that its U.S. debt holdings wonât be eroded by âreckless policies.â While Wen used the Chinese word for âguaranteeâ in his answer, it was translated into English as âensure.â
Delegates of Chinaâs legislative advisory body suggested that the biggest foreign holder of U.S. debt diversify away from Treasuries into more risky assets at the annual meeting that started on March 3.
Jesse Wang, executive vice president of China Investment Corp., said on March 4 that his $200 billion sovereign wealth fund may invest in âundervaluedâ commodity assets. Zhang Guobao, head of the National Energy Administration, said China should invest more in commodities instead of hoarding the U.S. dollar, the official Xinhua News Agency reported on March 7.
âWe have adopted a principle of diversification with our foreign-exchange investments,â said Wen. âSo far, our holdings are generally safe. China will mainly use the reserves for outbound investments and trade.â
To contact the reporter on this story: Eugene Tang in Beijing at eugenetang@bloomberg.netJudy Chen in Shanghai at xchen45@bloomberg.net
Last Updated: March 13, 2009 00:08 EDT
China âWorriedâ Over Safety of U.S. Debt, Wen Says (Update3)
Share | Email | Print | A A A
By Eugene Tang and Tian Ying
March 13 (Bloomberg) -- China, the U.S. governmentâs largest creditor, is âworriedâ about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said.
âWe have lent a huge amount of money to the United States,â Wen said at a press briefing in Beijing today after the annual meeting of the legislature. âOf course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of Chinaâs assets.â
China should seek to âfend off risksâ as it diversifies its $1.95 trillion in foreign-exchange reserves and will safeguard its own interests, Wen said. Chinese investors held $696 billion of U.S. Treasuries as of Dec. 31, an increase of 46 percent from the prior year.
Treasuries have dropped this year as President Barack Obama sells record amounts of debt to fund his $787 billion economic stimulus package. Merrill Lynch & Co.âs U.S. Treasury Master index shows the securities declined 0.5 percent last month, after falling 3.1 percent in January, the most since April 2004. The dollar has dropped 17 percent against the yuan since China ended a fixed exchange rate in July 2005.
Treasuries declined, causing the yield on the 10-year U.S. Treasury note to rise 3 basis points to 2.89 percent at 11:49 a.m. in Hong Kong, according to BGCantor Market Data. The yuan was little changed at 6.8380 per dollar. The Shanghai Composite Index of stocks climbed 0.7 percent.
Stable Yuan
âChina is worried that the U.S. may solve its problems with the fiscal deficit and banks by printing money, which will stoke inflation,â said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the countryâs second-biggest lender. âIf the U.S. can make sure this wonât happen, then China will continue to invest.â
U.S. Secretary of State Hillary Clinton urged China, while visiting officials in Beijing on Feb. 22, to continue buying U.S. debt, which she called a âsafe investment.â She didnât press China on its foreign-exchange policy, backing away from January comments by Treasury Secretary Timothy Geithner that the Chinese government manipulates its currency to boost exports.
China will maintain its policy of seeking a stable yuan, even as gains against the euro and Asian currencies hurt the nationâs exporters, Premier Wen said. Peopleâs Bank of China Governor Zhou Xiaochuan pledged last week to maintain yuan stability as investors pull money out of emerging-market assets because of slowing global economic growth.
Independent Policy
While the yuan has weakened 0.2 percent against the dollar this year, there has been a âdrastic depreciationâ in the euro and Asian currencies that has put a lot of pressure on Chinese exporters, Wen said. The currency has gained 8.6 percent against the euro this year and 6 percent against the Philippine peso.
âOur goal is to maintain a basically stable yuan at a balanced and reasonable level,â Wen said on the final day of the meeting of the National Peopleâs Congress. âAt the end of the day, it is our own decision and any other countries canât press us to depreciate or appreciate our currency.â
Collapsing exports have dragged the economy to its weakest growth in seven years and eliminated the jobs of millions of migrant workers. Wen reaffirmed Chinaâs target of an 8 percent expansion in 2009 as economies from the U.S. to Japan contract, saying the goal was âdifficult but possibleâ to achieve.
Stimulus Plans
China can add âat any timeâ to 4 trillion yuan ($585 billion) of stimulus measures to revive the worldâs third- biggest economy, Wen said. Gross domestic product expanded 6.8 percent in the fourth quarter, compared with 9 percent for all of last year and 13 percent for 2007.
âWe have reserved adequate ammunition,â Wen said, adding that the fiscal deficit is under control and the debt level still safe. âAt any time, we can introduce new stimulus.â
Yu Yongding, a former adviser to the central bank, said in an interview on Feb. 10 that China should seek guarantees that its U.S. debt holdings wonât be eroded by âreckless policies.â While Wen used the Chinese word for âguaranteeâ in his answer, it was translated into English as âensure.â
Delegates of Chinaâs legislative advisory body suggested that the biggest foreign holder of U.S. debt diversify away from Treasuries into more risky assets at the annual meeting that started on March 3.
Jesse Wang, executive vice president of China Investment Corp., said on March 4 that his $200 billion sovereign wealth fund may invest in âundervaluedâ commodity assets. Zhang Guobao, head of the National Energy Administration, said China should invest more in commodities instead of hoarding the U.S. dollar, the official Xinhua News Agency reported on March 7.
âWe have adopted a principle of diversification with our foreign-exchange investments,â said Wen. âSo far, our holdings are generally safe. China will mainly use the reserves for outbound investments and trade.â
To contact the reporter on this story: Eugene Tang in Beijing at eugenetang@bloomberg.netJudy Chen in Shanghai at xchen45@bloomberg.net
Last Updated: March 13, 2009 00:08 EDT
