China should not worry about being too heavily invested in the dollar and U.S. government debt, because its dependence is not unique in a world with few alternatives, a senior official at China's sovereign fund said.
Wang Jianxi, the chief risk officer at China Investment Corporation (CIC) [CIC.UL] which manages $300 billion, said on Saturday the market for U.S. Treasuries is the world's most liquid and the U.S. government is a credible borrower.
He said these qualities render dollar-denominated assets relatively stable and that there are few investment alternatives in the world with similar benefits.
We don't have to complain about the risk of buying U.S. dollars and Treasuries and the need to invest in other countries, Wang told an investment forum, adding that the views were his own.
Investing in other countries does not necessarily make our investment less risky, he said.
China is the world's biggest foreign holder of U.S. Treasuries, with a third of its $2.85 trillion in foreign exchange reserves invested in U.S. government debt.
But Wang argued that China is not the only country reliant on the dollar, listing sovereign wealth funds in Abu Dhabi, Norway and Singapore as other big buyers of dollar-denominated assets.
His remarks come as China President Hu Jintao gets ready for a visit to Washington next week, when the two world powers will try to find common ground in bilateral ties, which are complicated by a sensitive creditor-debtor relationship.
In a bid to limit China's vulnerability to a sharply weaker dollar, senior Chinese officials have campaigned for years for a an alternative reserve currency.
Wang said the attention China drew last year for buying Japanese and South Korean sovereign debt underscored the difficulties in investing in other smaller government debt markets.
It is also practical for China to invest the bulk of its reserves in the U.S. currency because global trade in commodities, energy and metals are settled in dollars, he said.
There is little choice but to invest a large portion of foreign reserves in U.S. dollars and Treasuries, Wang said.