China says foreign reserves not political `weapon`

China on Wednesday tried to allay concern about the political impact of its USD 2.5 trillion foreign reserves, saying they are not a "nuclear weapon" to control other nations.

Last Updated: Jul 07, 2010, 18:57 PM IST

Beijing: China on Wednesday tried to allay concern about the political impact of its USD 2.5 trillion foreign reserves, saying they are not a "nuclear weapon" to control other nations and its vast holdings of US Treasury debt "should not be politicized."
In the second in a series of statements this week on its
handling of the reserves, the foreign exchange agency said its
investments are judged on economic grounds. It expressed hope
they would be beneficial for China and the countries where it
invests.

The statement appeared to be an attempt to defuse
concerns in the United States and elsewhere over whether
Beijing might threaten to sell off Treasurys or other holdings
to punish them in political disputes. China is Washington`s
biggest foreign creditor, with just over USD 900 billion
invested in Treasurys.

In a question-and-answer format, the statement asked,
"Are China`s foreign reserves a `secret weapon` or a `nuclear
weapon`?" The reply said China is a responsible long-term
investor and "doesn`t seek the power to control recipients of
its investment."

The statement said the US bond market is an important
part of China`s reserves. It said Beijing will adjust its
holdings according to market performance and said they "should
not be politicized."
Echoing earlier appeals by Chinese leaders, it called on
Washington and other governments to follow prudent economic
policies to protect the value of Beijing`s investments.

The statement also ruled out a shift to increasing
China`s holdings of gold, saying prices fluctuate too much and
the global supply is too small.

PTI