China to Conduct 'Strategic Dynamic Adjustment' for Its US Treasury Bond Investment
Yicai Global
/SOURCE : Yicai
China to Conduct 'Strategic Dynamic Adjustment' for Its US Treasury Bond Investment

(Yicai Global) Dec. 23 -- Outsiders should not "overinterpret" the variation in the US treasury bonds held by China, said an unnamed official in the State Administration of Foreign Exchange (SAFE). China will take into consideration such micro-factors as the rate hike by the US and the curve of US treasury bond yield, so as to conduct "strategic dynamic adjustment" for its US treasury bond investment, state-run China News Service quoted the SAFE official as saying yesterday.

According to the latest data, China sold USD41.3 billion worth of US treasury bonds in October, bringing its total treasury holdings to USD1.1157 trillion, hitting a new low since July 2010. Accordingly, Japan became the largest creditor of the US in October. China has been selling US treasury bonds for five months in a row since June, which amounted to a total of USD128.3 billion during the said period.

China's behavior by no means represents strategic bond reduction, but an action aiming at overall resource allocation planning and some minor strategic adjustments in a dynamic manner to undertake more professional investment operation in line with the market principles and behavior, said the SAFE official.

He stressed that the US treasury bond is one of the vital investment means in international financial markets. In view of its rating, market share, liquidity and its features in risk returns, each country will regard it as a major investment choice.

Regarding China's foreign exchange reserves dipping below the critical point of USD3 trillion, which has widely concerned the markets, the official said the decrease in foreign exchange reserves was mainly caused by the central bank's offering liquidity into the market and the valuation effect thereof. For instance, among the currency basket of foreign exchange reserves, non-dollar currencies such as the euro and the Japanese yen have seen depreciation. "In the face of the current circumstances, our foreign exchange reserves standing at USD3 trillion is adequate enough, and is still in a rational and stable range. The foreign exchange reserves less than USD3 trillion by no means represents crisis," he pointed out.

As of the end of November, China's foreign exchange reserves totaled USD3.05 trillion, down USD69.1 billion from the previous month, a record decline since January this year.

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