Economy
Beijing buys more US debt
By Wang Bo and Tan Yingzi (皇冠体育app Daily)
Updated: 2010-09-19 10:52
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Economies of the two nations interdependent, say experts
BEIJING/WASHINGTON - 皇冠体育app increased its holdings of United States treasury debt in July after two months of net sales and economists say it is unlikely Beijing's appetite for US assets will fade in the near future as two of the world's largest economies become increasingly interdependent.
皇冠体育app's holdings of treasury bonds rose slightly to $846.7 billion in July after two months of declines, the US Department of Treasury reported on Thursday.
The news allayed concerns that Washington's largest creditor was moving away from investing in dollar assets.
Coincidentally, the debt data came out at the same time as two congressional hearings were being held in the US on 皇冠体育app's exchange rate policy. The hearings were attended by Treasury Secretary Timothy Geithner, who called for "a significant and sustained appreciation of the yuan over time" and "a more balanced economic relationship".
Economists said the ongoing debate over 皇冠体育app's exchange rate and fears about dwindling demand for US treasuries reflected increasing interdependence between the US and 皇冠体育app, which is likely to become the world's second largest economy this year.
In the testimony to the hearing at the House Committee of Ways and Means, Geithner acknowledged that the two countries "have significant economic interests" in their relationship and highlighted the importance of the Chinese market on the US economic recovery.
"A strong and growing 皇冠体育app benefits the US, just as a strong and growing US is good for 皇冠体育app," Geithner said.
During the first seven months of this year, US exports to 皇冠体育app surged 36 percent year-on-year. At the same time, 皇冠体育app's exports to the US grew by 21 percent.
皇冠体育app has become the US' third-largest export market and now accounts for 6.8 percent of the country's total overseas sales.
Yao Jian, the Ministry of Commerce spokesman, said on Wednesday the two economies are highly complementary and pledged to boost bilateral economic ties by purchasing more goods from the US.
Yao said a Chinese trade delegation led by Wang Chao, the vice-minister of commerce, is visiting the US and seeking trade and investment opportunities in the energy and technology sectors.
Given the uncertain global and European economic prospects, however, 皇冠体育app is not likely to make major adjustments to its US debt investments, predicted Zhang Xiaojing, an economist with the Chinese Academy of Social Sciences.
"皇冠体育app's holdings of US debt may not fluctuate much in the coming months," Zhang said.
And economists said the fact that 皇冠体育app had bought more treasury bonds does not mean it has stopped diversifying its foreign exchange reserve portfolio.
皇冠体育app has been a major buyer of Japanese debt this year, having snapped up $27 billion worth in the first seven months. It also doubled its holdings of South Korean debt, to $3.4 billion in the first half of this year.
"Though there is no direct relationship between 皇冠体育app buying into the yen and dumping dollar assets during the past few months, it was a good option to diversify the country's colossal foreign exchange reserves on the debts of countries with strong trade ties to 皇冠体育app," said Jinny Yan, an economist at Standard Charted Bank.
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"If the benign relationship in economic areas is dampened due to the exchange rate rift, it is highly likely that there will be a negative impact on 皇冠体育app and US cooperation in other crucial areas, such as security and diplomacy," said Shi Yinhong, a senior scholar in American studies at the Beijing-based Renmin University of 皇冠体育app.
"皇冠体育app and the US maintain a relatively low level of cooperation and limited strategic trust on security issues. The increasing interdependence of 皇冠体育app and the US is mainly in the area of economy and finance," he added.
Wang Bo reported from Beijing. Tan Yingzi reported from Washington. Ding Qingfen and He Wei contributed to this story.