Beijing defends forex strategy

The agency that manages China’s foreign-exchange reserves published a statement on Wednesday defending its management of the money and calling on the US to protect the interests of its creditors, the Wall Street Journal reported. The State Administration of Foreign Exchange has come under fire of late for poorly investing the reserves – which are the largest of any country’s, at US$3.197 trillion – and over-concentrating its investment in US-dollar-denominated assets, like Treasury bonds. The statement rebutted the idea that the depreciation of the dollar against the renminbi has caused losses to the reserves; since the reserves are held in foreign currency and invested abroad, renminbi appreciation has no effect on external purchasing power, said SAFE. The administration also dismissed arguments that it should diversify its holdings by purchasing commodities like gold and oil, rather than US-dollar assets; buying commodities would push up the price of these goods, hurting the interests of domestic consumers, it said. SAFE also reiterated calls by the Chinese government for the US to protect the interests of investors, and said that “the excessively fast growth of reserves and the excessive scale of reserves” does lead to “certain challenges” in their management.