China increases S Korean debt holdings to 4 trillion won

16:46, August 19, 2010      

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By June 2010, China's holdings of South Korean debt increased to nearly 4 trillion won (about 3.4 billion U.S. dollars), an increase of 111 percent compared with the end of 2009, according to a recent report of South Korean overseas investment securities released by Seoul-based Financial Supervisory Service.

As of July, China has bought more than 2.8 trillion won of South Korean bonds in 2010 and has become the third largest South Korean bond holder following Luxemburg and the United States.

China reduced U.S. bonds by 24 billion U.S. dollars and bought 5.3 billion U.S dollar of Japanese bonds in June 2010, indicating the stable improvement of the diversified investment of China's foreign exchange reserves. Experts said that the sound economic development in South Korea, the relatively stable exchange rate of the won and the higher rate of return on bonds are also important reasons for China to increase its holdings of South Korean debt.

Experts believe as China holds a total of 5 percent of the total South Korean national bonds issued in 2010, the increase of China's holdings of South Korean debt will not greatly affect the bond market of South Korea in the short term.

Chen Fengying, director of the Institute of World Economic Studies under the China Institute of Contemporary International Relations, said that as the bond market scale of non-major currencies is relatively small, it will cause greater influence once China, the country with the largest foreign exchange reserves in the world, increases its holdings in other bond markets besides the U.S bond market.

By People's Daily Online
Additional support provided by LOTO


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