China encouraged to reduce reliance on US T-bonds

China should reduce its foreign exchange reserves to less than US$800 billion due to the inherent risks posed by US Treasury bonds, said Cheng Siwei, an economist and former vice-chairman of the Standing Committee of the National People’s Congress, state media reported. "The country should diversify its currency portfolio for foreign exchange reserves and reduce the share of US dollar-denominated assets for risk control purposes," said Cheng. China is the largest single owner of US Treasuries, holding US$889 billion at the end of January. Cheng also commented on the issue of China’s exchange rate peg, and said, "The 3 percent fluctuation is acceptable at the current stage. We can expand the movement range and types of currency gradually when the government’s management level improves, and finally make the Chinese yuan a fully convertible currency."