Forex not an 'atomic weapon'
By Zhang Fengming |
July 8, 2010, Thursday
|
Print Edition
Print Edition
CHINA invests its foreign exchange reserves to buy financial stakes in targeted enterprises and does not seek to control them, the State Administration of Foreign Exchange, the nation's top currency authority, said yesterday.
In a rare move, SAFE issued a third notice seeking to allay concerns of how China, holding the world's largest foreign exchange reserves at US$2.45 trillion, is investing its reserves.
China would not use its record foreign exchange reserves as an "atomic weapon," SAFE said on its website.
SAFE also reiterated that the United States bond market was an important one for China to invest its forex reserves in. China would adjust its investment strategies according to market performance, which "should not be politicized."
The bulk of Chinese reserves are invested in US Treasury debt and other safe but low-yielding assets, but China launched a sovereign wealth fund in 2007 to earn a better return on a portion of its holdings.
China was the largest foreign holder of US Treasury bonds in April, with bonds worth US$900.2 billion, according to the US Treasury Department data.
SAFE yesterday also ruled out gold as a major investment option for China's forex reserves due to wide price fluctuations of the metal and limited stocks.
The limited supplies of gold meant large purchases by China could drive up prices of gold jewelry and other products, hurting domestic consumers as well as domestic prices which closely follow global prices.
Gold prices are trading around US$1,200 an ounce this year. GFMS, a precious metals consultancy, said yesterday that it predicted prices to breach US$1,300 in the second half of 2010 on growing investment demand.
The annual global production of gold stands at about 2,400 tons, and China is the world's largest gold producer and the second-biggest retail buyer after India.
China now holds 1,054 tons of gold and its holdings will change on "market conditions," SAFE said.
In a rare move, SAFE issued a third notice seeking to allay concerns of how China, holding the world's largest foreign exchange reserves at US$2.45 trillion, is investing its reserves.
China would not use its record foreign exchange reserves as an "atomic weapon," SAFE said on its website.
SAFE also reiterated that the United States bond market was an important one for China to invest its forex reserves in. China would adjust its investment strategies according to market performance, which "should not be politicized."
The bulk of Chinese reserves are invested in US Treasury debt and other safe but low-yielding assets, but China launched a sovereign wealth fund in 2007 to earn a better return on a portion of its holdings.
China was the largest foreign holder of US Treasury bonds in April, with bonds worth US$900.2 billion, according to the US Treasury Department data.
SAFE yesterday also ruled out gold as a major investment option for China's forex reserves due to wide price fluctuations of the metal and limited stocks.
The limited supplies of gold meant large purchases by China could drive up prices of gold jewelry and other products, hurting domestic consumers as well as domestic prices which closely follow global prices.
Gold prices are trading around US$1,200 an ounce this year. GFMS, a precious metals consultancy, said yesterday that it predicted prices to breach US$1,300 in the second half of 2010 on growing investment demand.
The annual global production of gold stands at about 2,400 tons, and China is the world's largest gold producer and the second-biggest retail buyer after India.
China now holds 1,054 tons of gold and its holdings will change on "market conditions," SAFE said.
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