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'China should cut its US debt holding'
(Reuters)
Updated: 2006-04-04 15:11 VISIT TO WASHINGTON
Hu meets U.S. President George
W. Bush in Washington on April 20. U.S. officials say Hu's visit will focus on
trade issues as the Bush administration seeks to narrow its trade gap with
China, which the U.S. claims hit a record $202 billion in 2005.
Analysts
say China has been gradually diversifying away from dollar assets in its foreign
exchange reserves but fears of a collapse in the U.S. currency will prevent it
from making any dramatic shift.
It has been a big buyer of U.S.
government bonds, helping to finance the U.S. current account deficit and keep
American interest rates low. Investors watch closely for any sign that Beijing
might shift the government's investment mix.
Central bank chief Zhou
Xiaochuan said last month that China would adjust the mix of its reserves in
light of global market conditions. In doing so, China's criteria would be
safety, liquidity and profitability, in that order.
China held $262.6
billion of U.S. Treasuries as of January, dwarfed by Japan's holding of $668.3
billion, according to U.S. Treasury data.
Chinese officials have denied
reports they plan to cut the current volume of dollar assets and analysts say
China may have to buy more U.S. assets as the country's foreign exchange
reserves have been growing rapidly, driven by the inflows of dollars from its
trade surplus, foreign investment and hot money.
Cheng also said China
should widen the yuan's trading band at an appropriate time, the newspaper said.
But China must keep the yuan "relatively" stable in the near term and
avoid an "excessively" high rise in foreign exchange reserves, he said.
The country would make the yuan fully convertible in the longer term,
but it still did not have a timetable, Cheng said.
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