China/US/Global economic crisis

Beijing will keep investing in US Treasury bonds

Article published on the 2009-03-23 Latest update 2009-03-23 13:38 TU

Chinese Premier Wen Jiabao.
(Photo: Reuters )

China will continue to target US Treasury bonds as the main investment vehicle for its foreign exchange holdings, a Beijing official said Monday. The announcement comes as some local commentators call for Beijing to find more profitable investment targets for its foreign exchange reserves, which became the world's largest at the end of 2008 with 1.4 trillion euros.

"Investing in US Treasury bonds is an important element in China's investment strategy and we will continue this practice," said Hu Xiaolian, deputy governor of the China's central bank.

As of late January, China had accumulated 545 billion euros in US Treasury bonds, according to US data.

Fears spread throughout Beijing after the United States approved a massive economic stimulus package that critics said could drive down the value of dollar-based assets.

Earlier this month Chinese Premier Wen Jiabao urged the US to safeguard its investments.

"To be honest, I am a little bit worried and I would like to ... call on the United States to honour its word and remain a credible nation and ensure the safety of Chinese assets," Wen said.

US President Barack Obama and his administration quickly tried to assuage fears and said China's bonds were safe.

However, US strategy to bailout the economy and the banking system could leave China vulnerable, Chinese Foreign Policy expert Yiyi Lu told RFI.

But last week Chinese media reported that the country's reserves had fallen by about 22 billion euros in January, partially due to the drop in the value of non-dollar assets.

At next week's G20 summit in London, Chinese President Hu Jintao is expected to urge reform of the global financial regulatory system and push for more decision-making powers for developing nations.