China should guard against risks from excessive holdings of U.S. assets as Washington could pursue a policy to weaken the dollar, a senior official at the State Administration of Foreign Exchange said in comments published on Tuesday.
We must be alert of economic and political risks in excessive holdings of U.S. dollar assets, Guan Tao, head of the international payment department at the foreign exchange regulator, said in an article.
The United States has taken an expansionary fiscal and monetary policy to stimulate economic growth, and the United States may find it hard to resist the policy temptation of weakening the dollar abroad and pushing up inflation at home, he said.
The article was published on the website of China Finance 40 Forum, a Beijing-based think-tank of Chinese economists, bankers and officials. It was later removed from the website (www.cf40.org.cn).
The website said the article was removed on Guan's request. Guan told Reuters later that the comments represented his personal view only.
Even before the comments, the dollar was broadly lower on the day, and it edged down slightly after his remarks. The dollar hit a one-month low against a basket of currencies and the euro and a record low versus the Swiss franc.
Market conditions are favorable for China to forge ahead with market-based reforms of the yuan regime, Guan said, adding however that there is no basis for any sharp yuan rise.
China has never published its holdings of U.S. Treasuries, but some economists have said as much as 70 percent of the country's foreign exchange reserves, which hit a record $3.05 trillion at the end of March, are parked in dollar assets.
China has been trying to diversify its reserves, the world's largest, away from the U.S. dollar, but analysts say such diversification has been gradual.
(Reporting by Zhou Xin and Kevin Yao; Editing by Ken Wills)