Deputy US Treasury Secretary Robert Kimmitt yesterday said he
has not seen evidence that China and other Asian nations are
selling off US treasuries.
"I think (China) will have a range of assets in (its) investment
portfolio," he said at a press briefing. "I think (China) and other
sovereigns will continue to hold (US) treasury securities," he
said.
Kimmitt is on a tour of China and Russia to reassure investors
that the United States remains open to foreign investments.
China sold more US treasury securities in April than any other
time in at least seven years, according to the US Treasury
Department website.
China sold a net US$5.8 billion of treasuries, the first drop in
its holdings since October 2005, according to statistics on the
website. The country held a total of US$414 billion, according to
the US Treasury Department.
The Chinese Ministry of Finance was not available for
comment.
Analysts said China's recent cutbacks in its holdings do not
indicate it will lead to a drastic sell-off of US treasuries,
although it's part of its preset strategy to diversify its foreign
exchange reserve investment portfolio.
Zhao Xijun, finance professor of the Renmin University of China,
said: "It's not surprising that China is selling that amount of US
treasuries."
The US treasuries market may influence the US benchmark prices
and China, as an important holder of US treasuries, may send a
signal to other investors and markets by selling a part of its
holdings, Zhao said.
China won't sell US treasuries in a large scale, however,
because it's a fairly good choice for investors. "Its security and
liquidity are better than many other investment options."
But the market is ever-changing and it's normal for investors to
fine-tune their strategies, he said. The weak dollar since last
year has accelerated such investment diversification, he added.
Though China may reduce some of its holdings of US treasuries,
Zhao said the money may not flow out of US soil. "It may be shifted
to other fields, such as corporate bonds and the stock market."
China decided in January that a part of its US$1.2 trillion
foreign exchange reserves may be diverted to commercial investments
with higher yields.
Kimmitt told reporters it is important to open up to foreign
investors and that he has not seen signs of rising nationalism in
China toward foreign investors. "I haven't seen any indication of
increasing nationalism."
On the financial spat with the Democratic People's Republic of
Korea over the frozen funds at a Macao bank, Kimmitt said he is
working toward returning the money and efforts are "in
progress".
(China Daily June 20, 2007)