SAFE: changes in China's forex reserves investment should not be "politicized"

China's increase or reduction of its holdings of U.S. debt are normal investment operations, said the country's State Administration of Foreign Exchange (SAFE), adding that these actions should not be "politicized."<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

SAFE emphasized that long-term, diversified investment will effectively reduce overall asset risks and assure the stability of the value of reserve assets.

<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />China has called on the United States to take actual actions to safeguard the sustainable development of the United States and the world economy, protect the interest of investors and maintain their confidence.

"The foreign exchange reserves give top priority to the safety of reserve assets," the SAFE said.

Responding to the question of whether China's foreign exchange reserves are invested into the stock market, private equity funds and other financial products with higher risk levels, officials from SAFE said that strict risk management is done before any financial products are chosen.

"As long as a certain financial product is in line with the standards, it will enter into the procedure of decision-making and risk management," an official from SAFE said.

The foreign exchange regulator also dismissed the possibility that gold has become a major channel for the investment of China's reserves.

The market volume of gold is limited and faces large fluctuations. Increasing investment in gold will not have a significant effect in the diversification of China's foreign exchange reserves, according to SAFE.

China holds up to 900 billion U.S. dollars worth of U.S. Treasury bonds now, but the acquisition of U.S. debt has slowed due to Beijing's concerns that Washington is running deeper into the red now that the Obama administration has launched a huge stimulus plan in an attempt to spend its way out of recession.