China has called on the United States to take responsible measures to improve confidence in the dollar in the midst of the U.S. debt crisis, thus expressing investor fears about a possible U.S. default. The call came at a time when representatives of U.S. political parties were debating a plan to raise the country’s public debt ceiling before the country’s government ran out of money to pay off its obligations.
“We expect the U.S. government to take responsible steps to restore confidence in the global financial market and be able to protect the interests of investors,” a spokesman for China’s foreign exchange reserves said. The announcement was posted on the currency regulator’s website in response to numerous queries about whether Beijing would cut its investments in the U.S. Treasury if rating agencies downgraded the U.S. credit rating.
China’s foreign exchange reserves department manages $ 3.2 trillion – the world’s largest foreign exchange reserves. The department said the purchase and sale of U.S. Treasury bonds is part of normal investment operations.
Because of its large amount of foreign exchange reserves, Beijing has few investment options and therefore invests most of its reserves in U.S. Treasury bonds, which are also the largest and most liquid asset class. About 2/3 of China’s foreign exchange reserves are invested in dollar-denominated assets, making China the largest creditor in the United States.