By Mure Dickie
Financial Times, London
Friday, November 26, 2004
http://news.ft.com/cms/s/ee5882b2-3f82-11d9-bd0e-00000e2511c8.html [1]
BEIJING -- The dollar recovered from a record low against
the euro and a five-year nadir to the yen after a Chinese
official denied a report that China had trimmed the amount
of US treasury bonds in its portfolio.
The China Business News, a Shanghai-based newspaper
launched recently by some of China's biggest media
groups, quoted Yu Yongding, a member of the central
bank's advisory monetary policy committee, as saying
Beijing had cut the proportion of foreign exchange
reserves held in dollars.
China Business News quoted Prof Yu as "revealing" that
the rate of increase of holdings of US government bonds
had fallen and total holdings were currently around
US$180 billion.
However, Prof Yu said the report was an erroneous
account of an off-the-record address to students in
Shanghai and stressed that he had no personal
knowledge of the composition of China's foreign
exchange reserves or reserve strategy.
Nonetheless financial markets reacted to the report.
The euro strengthened to a record $1.3330 against
the dollar before falling to $1.3240, from $1.3269 in
New York on Thursday. The greenback also rose
against the Japanese currency to Y102.69.
Prof Yu, a respected professor of economics, said he
had merely quoted statistics from the US Federal
Reserve supplied to him by friends at a foreign
investment bank.
Statistics on the US Treasury Department's website
show mainland Chinese holdings of treasury securities
totalled US$174.7 billion at the end of September, up
from US$172.3bn at the end of August.
Meanwhile China's foreign exchange reserves rose from
US$496.2 billion to US$514.5 billion, suggesting a fall
in the proportion of reserves held in treasury bonds.
The recent slide in the dollar has provoked widespread
discussion in China about the possible losses being
suffered because of the country's enormous foreign
exchange reserves. Beijing does not give any
breakdown of its reserve holdings.
"I think the Chinese monetary authorities are very clever
and they must already have taken action," Prof Yu said.
"But I have no information whatsoever about what they
are doing."
Prof Yu is currently a member of the People's Bank of
China's monetary policy committee, a consultative body
that groups senior officials from a number of ministries
and departments and a single academic and which
usually meets four times a year.
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