China rules out use of forex reserves to bail out Europe

Though China may be sitting on an over $3-trillion foreign exchange stockpile, but it won't leverage those funds for any major bail-out of indebted European nations, China's vice foreign minister Fu Ying said.

Speaking at a dinner hosted by the American Chamber of Commerce in China (AmCham-China), she said China couldn't use its foreign exchange reserves to rescue other countries. ''The argument that China should rescue Europe does not stand, as reserves are not managed that way,'' the minister said.

While she rejected the idea that China use a major portion of its $3.2-trillion foreign exchange reserves to provide relief to indebted European countries, the minister did not rule out any focused use of the funds to address the debt crisis in Europe.

While a major portion (about a third) of China's foreign exchange reserves is tied up in sticky dollar assets, the country is also believed to have invested a fifth of its reserves in euro assets as well.

China, according to reports, is left with free reserves of around $470 billion to invest annually.

China, she said, ensures ''safety, liquidity and proper profitability'' in the management of its foreign exchange reserves, adding that the purchase of overseas bonds are also based on this principle.