Senior China official urges cut in US debt holding
Tue Apr 4, 2006 5:26 AM ET
By Kevin Yao and Benjamin Kang Lim
BEIJING (Reuters) - China should trim its holdings of U.S. debt, a senior Chinese official said, rattling markets on Tuesday in the run-up to a visit by President Hu Jintao to Washington this month.
As China is a leading financier of the U.S. current account deficit and holds the world's largest foreign exchange reserves, the comments from Cheng Siwei, a vice chief of the national parliament, sent the dollar and U.S. government bonds lower.
The comments could add to the contentious issues that will come up during Hu's visit, notably what some U.S. politicians and companies see as currency manipulation by China, accused of holding down the yuan to gain an unfair trade advantage.
Hong Kong's Beijing-funded Wen Wei Po newspaper carried Cheng's comments, made in Hong Kong on Monday.
"China can stop buying dollar-denominated bonds, increase buying of U.S. products and gradually reduce its holdings of U.S. bonds," the newspaper quoted him as saying. "But all these must follow the prescribed order," he added, without elaborating.
Despite rising short-term interest rates, longer-term debt yields in the United States are exceptionally low by historical standards. Any move by China to sell some of its massive debt holdings could drive up long-term rates, which ultimately could make it costlier for Americans to take out home mortgages.>>>cont
Link Here
By Kevin Yao and Benjamin Kang Lim
BEIJING (Reuters) - China should trim its holdings of U.S. debt, a senior Chinese official said, rattling markets on Tuesday in the run-up to a visit by President Hu Jintao to Washington this month.
As China is a leading financier of the U.S. current account deficit and holds the world's largest foreign exchange reserves, the comments from Cheng Siwei, a vice chief of the national parliament, sent the dollar and U.S. government bonds lower.
The comments could add to the contentious issues that will come up during Hu's visit, notably what some U.S. politicians and companies see as currency manipulation by China, accused of holding down the yuan to gain an unfair trade advantage.
Hong Kong's Beijing-funded Wen Wei Po newspaper carried Cheng's comments, made in Hong Kong on Monday.
"China can stop buying dollar-denominated bonds, increase buying of U.S. products and gradually reduce its holdings of U.S. bonds," the newspaper quoted him as saying. "But all these must follow the prescribed order," he added, without elaborating.
Despite rising short-term interest rates, longer-term debt yields in the United States are exceptionally low by historical standards. Any move by China to sell some of its massive debt holdings could drive up long-term rates, which ultimately could make it costlier for Americans to take out home mortgages.>>>cont
Link Here
posted by Kangaroo Brisbane Australia at 12:54 PM
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