Europe still key investment market, says forex regulator

08:50, May 28, 2010      

Email | Print | Subscribe | Comments | Forum 

Europe "was, is and will remain" a key investment market for China's foreign exchange reserves, the State Administration of Foreign Exchange (SAFE) said on Thursday.

The euro and European capital markets rallied after China made the announcement.

The Financial Times, citing unidentified banking sources, reported on Wednesday that officials at SAFE had met with bankers in recent days on reviewing its holding of eurozone debt following concerns over the sovereign debt crisis in Europe.

"This report is groundless," SAFE, which manages China's more than $2.4 trillion of foreign exchange reserves, said in a statement.

"China is a responsible long-term investor and has always firmly supported the European Union (EU) integration process," the statement said, adding that the nation supports the package of financial stabilization measures taken by the EU and the International Monetary Fund.

"We believe that with the joint effort of the international community, the eurozone will be able to overcome its difficulties and maintain the steady and healthy development of European financial markets," the foreign exchange regulator said.

Gao Xiqing, president of China Investment Corp, said on Wednesday that the volatility in the eurozone markets has not made the sovereign wealth fund restructure its European portfolio, as it is a long-term investor.

Zuo Xiaolei, chief economist of China Galaxy Securities, said even if China reviews its European investment, it is normal. "China needs to evaluate the risk of its investment in Europe as it owns huge foreign exchange reserves, but evaluation doesn't necessarily mean reduced holdings."

With the global financial markets still facing many uncertainties despite signals of economic recovery, especially as the eurozone risks being trapped in a sovereign debt crisis, a review of the investment in the continent "can provide us a clear picture of the real risks", she said.

Sun Lijian, a professor at the China Center for Economic Study at Fudan University, said that reducing the euro debt is not a good option. "Reducing eurozone debt means China would have to increase dollar holdings; however, the performance of the US dollar may be even worse in the long run."

The current European crisis, which was triggered by the Greek debt crisis, will not last long, Sun said. "China needs to hold eurozone debt in order to continue to push reform of the foreign exchange rate system and diversify its forex reserves."

European stocks, Asian shares and US index futures surged after SAFE's clarification. The euro rebounded from near four-year lows against the dollar and European shares rose on Thursday on China's denial of a report that it is reviewing its investment in eurozone debt.

Source:China Daily


  • Do you have anything to say?


Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • A Libyan National Transitional Council (NTC) fighter shows what is believed to be human jawbone found inside a mass grave near Abu Salim prison in Tripoli, Libya, Spet. 27, 2011. The NTC on Sunday said they had found a mass grave containing the bodies of 1,270 people killed by Gaddafi's security forces in a 1996 massacre at Abu Salim prison in southern Tripoli. (Xinhua/Li Muzi)
  • Rescue workers and local residents search for survivors after a building collapsed in old Delhi, India, Sept. 27, 2011. At least 10 people were killed and 35 injured when an old three-storey building collapsed. More than a dozen people are still feared trapped under the debris, police said. (Xinhua/Partha Sarkar)
  • A visitor has flying experience in the windmill castle of Jinshitan National Holiday resort in Dalian, northeast China's Liaoning Province, Sept. 27, 2011. The castle is a 23-meter-high building with 21 meters in diameter. The castle uses wind tunnel to make objects floating in the air. It is the first indoor stadium in China, which enables people to have flying experience. (Xinhua/Zhang Chunlei)
  • An Indian artist colours clay idols of Goddess Durga for the upcoming Durga Puja festival in Calcutta, capital of eastern Indian state West Bengal on Sept. 27, 2011. The festival celebrates the homecoming of Mother Goddess Durga and the victory of good over evil, dramatized by the goddess' demolition of the evil buffalo demon, Mahishasura. (Xinhua/Tumpa Mondal)
  • A model presents a creation of new upcoming designer Sergei Grinko at the Milan Fashion Week Women's Wear Spring/Summer 2012 in Milan, northern Italy, Sept. 27, 2011. The Milan fashion week closed on Tuesday. (Xinhua/Wang Qingqin)
  • Yu Guangyao (2nd R), president of Shanghai Shentong Metro Co., Ltd, bows his apology at a press conference on the subway trains collision accident happened Tuesday afternoon, in east China's Shanghai Municipality, Sept. 27, 2011. By 8:30 p.m. (1230 GMT) Tuesday, a total of 271 injured people in the accident have received medical treatment in hospitals, among them 180 have been dispatched. Other 61 injured people are still in hospital, in which 30 are under emergency observations. No critical injuries have been reported. (Xinhua/Chen Fei)
Hot Forum Discussion