'China should cut its US debt holding'
(Reuters)
Updated: 2006-04-04 15:11
China should trim its holdings of U.S. debt and can stop buying dollar bonds,
a vice chief of the national parliament said, rattling markets on Tuesday, weeks
before President Hu Jintao visits Washington.
Cheng Siwei speaks at
a Fortune Forum in Beijing in this May 17, 2005 photo. He suggested China
cut its holdings of U.S. debt and stop buying dollar bonds on
Monday, April 3, 2006. [newsphoto] | 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 sent the dollar
lower against the euro and yen and pushed U.S. government bond prices
down.
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 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 said, without setting out that
sequence.
An official at the central bank said this was merely Cheng's
personal opinion and a reporter present for the speech said Cheng had stressed
he was expressing his own views.
"The comments only reflected his
academic view. The People's Bank of China has been studying issues regarding the
management of foreign exchange reserves," the central bank official told
Reuters.
Cheng is one of more than 10 vice chairpersons of the
parliament, as well as chairman of the China Democratic National Construction
Association, one of eight political parties in China.
"Cheng
Siwei is a scholar and at the same time a national leader," said Zhang Zuhua, a
former official familiar with the workings of the government. "He often
expresses his views as an expert, and doesn't just give bureaucratic talk.
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