China calls itself a “responsible” investor to soothe dollar selling fear

Beijing, Aug 12 – China’s central bank said it is a responsible international investor on Sunday in response to recent market talks that Beijing, the world’s largest foreign exchange reserve holder, may dump dollar-denominated assets. In an exclusive interview with the state-run Xinhua news agency to clarify Beijing’s official stance on the issue, an official with the People’s Bank of China said US dollar-denominated assets, including US government bonds, are important components in China’s foreign exchange reserves portfolio. “China is a responsible investor in the international financial market,” said the central bank official, whose name is not disclosed. China’s foreign exchange reserves reached $1.33 trillion at the end of June, and it is widely speculated that at least two thirds of the assets were in form of dollar-denominated assets.China has never officially revealed the portfolio of its foreign exchange reserve portfolio treating the information as a state secrete. Two Chinese economists with government research institutions, namely He Fan with Chinese Academy of Social Sciences, and Xia Bin, a former central bank official now with the cabinet’s Development Research Center, published comments last week arguing that Beijing could use its large dollar assets as “bargaining chip” if the United States forced China to revalue its currency. The two economists have clarified on local media that their comments only represent academic views instead of any official plans, but their opinions still caused a stir in both the financial and political circles in Washington. US Senator Charles Grassley wrote a letter to Zhou Wenzhong, the Chinese Ambassador in the United States, asking Zhou to clarify the issue. In Sunday’s Xinhua interview, the Chinese central bank official said China hope to increase understanding and to seek consensus with the United States.