China’s vast foreign exchange reserves are diverse, long term investments and will not be used to speculate on currency markets, Reuters reported, quoting a senior government official. Yi Gang, head of the State Administration of Foreign Exchange, said in a statement at the National People’s Congress that the country’s US$4.2 trillion foreign exchange stockpile included multiple currencies. "Currently, China has built a moderately diversified currency structure including the U.S. dollar, euro, Japanese yen, etc," he said. China’s reluctance to disclose the make-up of its forex reserves has in the past worried investors, who fear that with the sheer size of the country’s reserves, even minor portfolio shifts can have a drastic effects on global markets. It is also likely to worry the US government, who may fear that a Chinese dump of US treasury holdings could have a devastating effect on the global economic recovery. The prospect of China dumping its reserves caused alarm last month as the US Treasury published data showing that China cut its holdings of Treasuries by US$34.2 billion in December. Total holdings, according to revised figures, stood at US$895 billion at the end of 2009.
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