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US Treasury bonds still China's best choice

(People's Daily Online)

08:07, July 24, 2012

According to U.S. Treasury Department, China is still the biggest holder of the U.S. debts. It increased holdings of U.S. Treasury bonds of $ 5.2 billion in May, pushing the gross holding to 1.17 trillion U.S. dollars. Its data show that China had increased 25.6 billion U.S. dollars for two straight months.

There is no best choice

Risk aversion in the market and the upward trend of U.S. dollar make investors choose it.

Mei Xinyu, a researcher with Department of Commerce, said China maintained surplus in the international balance of payments, so a big proportion of the increased foreign exchange income will be turned into foreign exchange reserves.

Since mid-March, the U.S. dollar has shown an evident upward trend, which naturally attracted market participants. In China's foreign exchange reserves up to trillions of dollars in the foreign exchange reserves, to increase the investment in U.S. debts is feasible, Mei said.

Talking about the reasons for China's holdings of U.S. debts, Li Ruoyu, Senior Economist with the State Information Center said the U.S. Treasury bonds has become China’s choice because of their safety, liquidity and profitability.

Although the United States is also in the financial crisis, but relative to other countries, it adjusted and responded promptly. We do not have the best choice, only the second best option, said Li.

Gary Locke, U.S. Ambassador to China, recently said that U.S. Treasury bonds are safe assets as President Obama and the U.S. Congress has developed policies to guarantee the U.S. fiscal credibility.

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