Describing the US bond market as “important” to China, an official with China’s foreign exchange office said that China expected a greater inflow of capital this year. This suggests that China is preparing for a stronger yuan, but the official provided no further insight regarding when or how much the yuan would be permitted to appreciate.
“The U.S. Treasury market is the world’s largest government bond market. Our foreign exchange reserves are huge, so you can imagine that the U.S. Treasury market is an important one to us,” Yi Gang, head of the State Administration of Foreign Exchange (SAFE), told a news conference.
Noting that China does not use its estimated $2.4 trillion in foreign exchange reserves for short-term speculation, Yi poured cold water over adding more gold to China’s reserves.
“It is, in fact, impossible for gold to become a major investment channel for China’s foreign exchange reserves. I have 1,000 tonnes now, and even if I doubled that holding, according to current prices, that would be about $30 billion,” Yi said.
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