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Experts split on debt buying
By Lydia Chen |
September 15, 2011, Thursday
|
Print Edition
Print Edition
CHINESE economists are divided on whether China should back its major trade partners, which are facing a debt crisis, by buying more of their bonds.
The adviser to the People's Bank of China, Li Daokui, said yesterday some of the country's investments in United States Treasuries should be sold when the US debt crisis stabilizes and that more funds should go into the private sector in the West.
At the World Economic Forum meeting in Dalian, Li argued that as China's US$3.2 trillion foreign exchange reserves grow, the increase should be invested in US firms as part of a strategy to diversify for the long term. He suggested private Chinese firms be allowed to invest in US stocks, but buying European debt would be unwise and run counter to the need to diversify.
Li said buying European Union debt "blindly" will only prolong the EU's problems unless reforms are launched.
Yu Yongding, a former adviser to the PBOC, supported Li. Yu told Caijing Magazine yesterday that China should not buy bonds issued by eurozone countries which are in dispute with the European Central Bank over policies.
"China is not a lender of last resort for troubled countries and should wait until European countries come up with a clear roadmap to solve their sovereign debt crisis," Yu said.
Liu Erfei, managing director of Merrill Lynch (Asia-Pacific), also suggested China should avoid European debt.
"There are (other) much safer assets out there. Why should China buy empty promises that are depreciating?" Liu told Sina.com.
But other economists say that it is in China's interests to continue helping the economies cope with their debt problems. Even Premier Wen Jiabao has reiterated China is willing and ready to "offer a helping hand" by stepping up investments in Europe.
Wu Xiaoling, a former deputy central bank governor and now a lawmaker, said helping Italy, for example, would be in the interests of China and the world.
The Italian government has held discussions with Chinese officials amid speculation Rome is seeking to persuade China to buy its bonds or invest in its private sector.
The adviser to the People's Bank of China, Li Daokui, said yesterday some of the country's investments in United States Treasuries should be sold when the US debt crisis stabilizes and that more funds should go into the private sector in the West.
At the World Economic Forum meeting in Dalian, Li argued that as China's US$3.2 trillion foreign exchange reserves grow, the increase should be invested in US firms as part of a strategy to diversify for the long term. He suggested private Chinese firms be allowed to invest in US stocks, but buying European debt would be unwise and run counter to the need to diversify.
Li said buying European Union debt "blindly" will only prolong the EU's problems unless reforms are launched.
Yu Yongding, a former adviser to the PBOC, supported Li. Yu told Caijing Magazine yesterday that China should not buy bonds issued by eurozone countries which are in dispute with the European Central Bank over policies.
"China is not a lender of last resort for troubled countries and should wait until European countries come up with a clear roadmap to solve their sovereign debt crisis," Yu said.
Liu Erfei, managing director of Merrill Lynch (Asia-Pacific), also suggested China should avoid European debt.
"There are (other) much safer assets out there. Why should China buy empty promises that are depreciating?" Liu told Sina.com.
But other economists say that it is in China's interests to continue helping the economies cope with their debt problems. Even Premier Wen Jiabao has reiterated China is willing and ready to "offer a helping hand" by stepping up investments in Europe.
Wu Xiaoling, a former deputy central bank governor and now a lawmaker, said helping Italy, for example, would be in the interests of China and the world.
The Italian government has held discussions with Chinese officials amid speculation Rome is seeking to persuade China to buy its bonds or invest in its private sector.
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