China's forex reserves not "atomic weapon": SAFE

17:06, July 07, 2010      

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China's State Administration of Foreign Exchange (SAFE) Wednesday rejected concerns that it would use China's foreign exchange investments as an "atomic weapon" against investment targets.

The country's foreign exchange regulator posted a question-and-answer statement on its website, saying investments would be assessed according to their performance, and that "We are not seeking to control investment targets"s via foreign exchange investments."

It was the SAFE's second statement on China's foreign reserves investment this week after an assurance Tuesday that China had kept its foreign exchange reserve assets "generally safe" during the global financial crisis.

China's foreign exchange reserves stood at 2.45 trillion U.S. dollars at the end of March, data from the People's Bank of China, or the central bank, showed.

According to the U.S. Treasury Department, China was still the largest foreign holder of U.S. treasury bonds in April, with bonds worth 900.2 billion U.S. dollars.

The SAFE statement said the U.S. bond market was an important market for China's foreign reserves, and China would adjust its investment strategies according to market performance, which "should not be politicized."

It reiterated that China was a long-term, responsible financial investor when investing its record reserves. It also expressed hopes that the United States could take action to protect the interests of its foreign investors,

"Safety is an important concern for China's foreign reserve investment," said the statement.

The statement also ruled out gold as a major investment channel of China's foreign exchange reserves, due to limited market capacity and wide price fluctuations.



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