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People's Daily Online>>China Business

China's US Treasury stock at 16-month low (2)

By Wei Tian (China Daily)

08:28, January 20, 2012

Dagong predicted that the US' debt-to-GDP ratio may continue to rise to 105.8 percent in 2012 from 100.7 percent in 2011. And the US Federal Reserve is likely to launch a third round of quantitative easing - injecting more money into the economy - in the middle of the year.

In December 2011, China's foreign exchange reserves declined on a quarterly basis for the first time in more than a decade, falling to $3.18 trillion, according to data from the People's Bank of China, the central bank.

"Although declining, the (foreign-exchange) reserve is still huge," Zhou Jingtong, a researcher with Bank of China Ltd, was quoted by China Business News as saying.

"Diversifying the portfolio and moderately reducing dollar assets is the only choice in the long term."

Investing in US Treasury bonds is "relatively safe" at the moment but is definitely not the best step to take, Zhou said. He said the chances are good that the securities will depreciate.

"Diversifying foreign reserves calls for varying the types of currencies and also diversifying assets," said Mei Xinyu, a senior researcher at the Ministry of Commerce's Chinese Academy of International Trade and Economic Cooperation.

Mei said the Chinese government should concentrate more on holding diverse classes of assets - by, for instance, investing in the US stock market or in stocks in other countries.

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