MercoPress. South Atlantic News Agency

China rules out ‘nuclear option’ of dumping vast holdings of US Treasury bonds

China has 2.45 trillion US dollars in international holdings, most of which is US bonds

China ruled out the “nuclear” option of dumping its vast holdings of US Treasury securities but called on Washington to be a responsible guardian of the dollar.

In a series of statements explaining its work to the Chinese public, the State Administration of Foreign Exchange, SAFE, sought to allay concerns in the outside world that arise whenever Beijing shifts its holdings of US government debt.

“Any increase or decrease in our holdings of US Treasuries is a normal investment operation,” SAFE, the arm of the central bank that manages China's official currency reserves, said.

SAFE said it constantly adjusts its portfolio to maximize returns, and any changes to its US Treasury portfolio should be seen in that light and not interpreted politically.

In a series of questions and answers posted on its website, www.safe.gov.cn, SAFE asked rhetorically whether China would use its 2.45 trillion US dollars stockpile of reserves, the world's largest, as a “nuclear weapon.”

SAFE said such concerns were completely unwarranted.

“The US Treasury market is the world's largest government bond market, and US Treasury bonds deliver fair good security, liquidity and market depth with low transaction costs. The US Treasury market is a very important market for China,” the agency said.

China held 900.2 billion in US Treasuries at the end of April, according to US Treasury data released on June 15. Bankers say China's total holdings of dollar-denominated assets are much greater, accounting for perhaps two-thirds of its reserves.