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China to continue investing in U.S. Treasury bonds

China will continue investing in U.S. government bonds while paying close attention to possible fluctuations in the value of those assets, said a deputy governor of China's central bank on March 23 in Beijing.

"Investing in U.S. Treasury bonds is an important component of China's foreign currency reserve investments," Hu Xiaolian, deputy governor of the People's Bank of China, told a briefing about President Hu Jintao's participation in the Group of 20 financial summit in Britain scheduled for April 1 to 2.

"We are naturally relatively concerned with the safety and profitability of U.S. government bonds," she added.

China's reserves hit a record 1.95 trillion U.S. dollars at the end of 2008, the largest in the world and far exceeding those of Japan, the second-largest foreign exchange holder, which had 1.03 trillion U.S. dollars.

China has invested its huge foreign exchange reserves in low-risk but low-yield assets, such as U.S. government bonds. Treasury bond assets fluctuate during different periods, according to Hu.

Treasury bond purchases would remain key to China's investment plans, but China would keep close watch on them, Hu said.

Given that the U.S. dollar is still the leading currency used in the settlement, valuation and payment of international trade, China will pay closer attention to the supervision of the international monetary system based on the U.S. dollar, Hu said.

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