US tries to calm China's fears over bonds, investments

The US administration yesterday  tried to weather China's concern about the safety of US treasury bonds and other investments saying US was the safest place in the world for investments.

''There's no safer investment in the world than in the United States,'' White House press secretary Robert Gibbs said at a briefing in Washington.

Wen Jiabao, China's prime minister, on Friday said in the parliament: "President Obama and his new government have adopted a series of measures to deal with the financial crisis. We have expectations as to the effects of these measures.''

He added that China has lent a huge amount of money to the US.

''Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried. I'd like to take this opportunity here to implore the United States ... to honour its words, stay a credible nation and ensure the safety of Chinese assets."

''The US Treasury market remains the deepest and most liquid market in the world,'' Treasury spokeswoman Heather Wong asserted.

''President Obama is committed to taking the steps necessary to restore growth and put this country on the path of fiscal sustainability, including cutting the long-term deficit in half over the next four years,'' he said.

During the first five months of fiscal 2009, which began on 1 October, the US budget deficit swelled to a record $764.5 billion, compared with a $265 billion shortfall during the same period a year earlier. The shortfall this year already has exceeded the record $459 billion gap for all of 2008.

US secretary of state Hillary Clinton urged Chinese officials, while on a visit to Beijing on February 22, to continue buying US debt, which she called a 'safe investment'.

Wen said that while China's first priority was to protect its own interests, it will "at the same time also take international financial stability into consideration, because the two are inter-related."

He said China hasn't pushed down the value of the yuan, and repeated the government's commitment to currency stability "at a reasonable and balanced level."

The yuan has hovered around 6.84 to the dollar since July 2008.

Wen said China alone would decide where it goes from there. "No country can pressure us to appreciate or depreciate" the currency, he said.

Treasury secretary Timothy Geithner this week called on the G-20 to increase funding for the International Monetary Fund by as much as $500 billion to help combat the financial crisis. Achieving that sum likely will depend on getting agreement from countries that hold large foreign exchange reserves, such as China and Saudi Arabia.
 
China holds the world's largest foreign-exchange reserves, reported at $1.946 trillion at the end of 2008.

China held $696 billion in US Treasury debt as of 31 December, more than Japan's holdings of $578 billion. Foreign holdings of US Treasury debt at the end of last year totaled $3.1 trillion.