Chinese economists deem huge holding of US bonds "risky," split on way out

BEIJING, May 31 (Xinhua) -- On the first day of U.S. treasury secretary Timothy Geithner's visit to China, the Beijing-based Global Times published a survey of 23 famous Chinese economists on Sunday, saying that the majority of them deemed the vast holding of U.S. bonds "risky."

Among the 23 experts polled, 17 said they believed that U.S. equities pose great risks to China's economy.

Geithner will begin his first visit to Beijing as US treasury secretary in an attempt to assure the U.S.' biggest creditor that its large holding of purchased US bonds is safe.

The visit also highlights Geithner's comments made earlier this year alleging that China has manipulated its currency.

Li Wei, an expert with the Institute of Ministry of Commerce, and Tian Yun, a scholar at the China Macro Economics Institute, expressed concerns over the risks, saying that the United States may export its deepening crisis to China "by printing U.S. dollar notes uncontrollably."

But five other experts, including Yi Xianrong, a researcher at the financial research center of the Chinese Academy of Social Sciences (CASS), and Mei Jun, deputy director of the Finance and Securities Institute at Renmin University of China, said they don't believe U.S. equities pose "great risks" to the country's economy.

They said compared with other investment, the investment in U.S. notes are less risky as the U.S. is still the engine of the world economy.

Hu Zhihao, a scholar of the Finance Institute of CASS, said the way China holds U.S. equities poses the risk as almost all the foreign reserves are in the hands of the government, which cannot be sustained and will have to change gradually.

Knowing the potential risks, 15 of the interviewed economists said they were against the idea to quickly offload China's possession of U.S. debt as a means to strengthen the country's financial stability and decrease Beijing's vulnerability to the already ailing world economy.

Song Fengming, director of the Department of Finance in the School of Economics and Management at Tsinghua University, said China has no better option but to buy U.S. Treasury bonds, while other options, such as the Japanese Yen and British pound, are volatile and soft.