China ‘Worried’ About Safety of U.S. Treasuries

China ‘Worried’ About Safety of U.S. Treasuries
By Bettina Wassener | NYTimes

Jobs, in particular, are a major concern for the Chinese authorities, who fear potential social unrest as millions of migrant workers’ jobs have fallen victim to the global slowdown. “We have reserved adequate ammunition,” Mr. Wen said, adding that China’s fiscal deficit is under control and the debt level still safe. “At any time, we can introduce new stimulus,” he said, quoted by Bloomberg News.

China, the world’s biggest holder of United States government debt, on Friday expressed concern about the safety of those assets as American deficits have ballooned with costly stimulus and bailout packages aimed at rescuing the economy..

The Chinese prime minister, Wen Jiabao, said he was “worried” about its holdings of U.S. Treasuries and called on the United States to provide assurances that the investment was safe. His remarks came at a news conference in Beijing after the final session of the National People’s Congress, the Chinese legislature.

China has the world’s largest reserves of foreign exchange thanks to years of double-digit growth in the years that preceded the financial crisis that began in the United States in 2007. Beijing has been deploying much of its reserves in increased purchases of U.S. Treasuries and the financing of major investment projects designed to prop up flagging growth at home.

Analysts estimate that nearly half of China’s $2 trillion in currency reserves are invested in U.S. Treasuries and notes issued by other government-affiliated agencies.

Those Chinese investments have helped assure the stability of the U.S. Treasury market despite the economic convulsions of the last year, and some economists have warned of alarming consequences should the Chinese investments stop propping up the market for American public-sector debt.

During her visit to China last month, Secretary of State Hillary Rodham Clinton sought to reassure Beijing that those holdings remained a reliable investment.

Mr. Wen sought added reassurances on that front on Friday, calling on the United States to “maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

He also stressed that China stood ready to expand its already sizeable stimulus measures if the global slowdown required extra action.

Beijing in November announced a stimulus package of 4 trillion yuan, or $585 billion, focused on infrastructure spending, and Mr. Wen on Friday said China had enough resources to spend more in a bid to safeguard jobs.

Jobs, in particular, are a major concern for the Chinese authorities, who fear potential social unrest as millions of migrant workers’ jobs have fallen victim to the global slowdown.

“We have reserved adequate ammunition,” Mr. Wen said, adding that China’s fiscal deficit is under control and the debt level still safe. “At any time, we can introduce new stimulus,” he said, quoted by Bloomberg News.