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China says investment plans won't affect its dollar assets

Section: Daily Dispatches

Maybe ... if owners of hard assets around the world are willing to trade them to China for China's U.S. government bonds and not liquidate the bonds and spend the cash on anything themselves. There's a sucker born every minute, but are there really THAT many suckers outside China?

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By the Associated Press
via Yahoo News
Thursday, March 15, 2007

BEIJING -- China's creation of a company to invest a portion of its $1 trillion in foreign exchange reserves will have no impact on Beijing's holdings of U.S. dollar-denominated assets, Premier Wen Jiabao said Friday.

Wen made the comment at a news conference in response to a question about how the planned company would invest the reserves. Some economists have suggested that China's plans to diversify its investments could affect its substantial purchases of U.S. Treasuries, which helps to finance the U.S. government budget deficit.

China is believed to keep as much as 70 percent of its reserves in U.S. Treasuries and other dollar-denominated assets.

"It is true that in China's foreign exchange reserves, U.S. dollar-denominated assets account for a large proportion," Wen said. "I can assure you that instituting such a foreign exchange company will not have an impact on the U.S. dollar-denominated assets."

Wen gave no other details.

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