CHINA / National
China central banker urges reserve diversification
(chinadaily.com.cn / Agencies)
Updated: 2006-06-28 11:59
A leading Chinese central bank official said that countries around the
world should gradually rely less on the U.S. dollar for trade and their
foreign exchange reserves.
The remark comes after the repeated suggestions by former U.S. Treasury
secretary and president of Harvard University, Lawrence H. Summers, that
the world's biggest holders of U.S. Treasury bonds ought to find better
ways to invest their hard-earned money.
"Internationally speaking, the situation of over-reliance on a certain
country's currency for international trade, settlements and reserve
assets should be gradually changed," Wu Xiaoling, deputy governor of the
People's Bank of China, said in remarks reported by the Financial News on
Tuesday.
Following the comments, the dollar briefly fell vs the yen, but soon
recouped all the earlier losses, Reuters reported.
Wu did not specifically refer to the dollar by name, but it is the
world's main reserve currency and the one in which the bulk of trade is
conducted.
Lawrence H. Summers, who was Secretary of Treasury in the last 18 months
of the Clinton administration, has argued in recent speeches that
developing countries in Asia, Eastern Europe, Latin America and Africa
should put much of their excess funds into stocks.
Too often, he contends, the central banks of those countries invest their
hoards of foreign securities -- totaling several trillion dollars -- in
safe but low-yielding U.S. T-bonds, the Washington Post reported on June
22.
The return "will be zero" on those bonds after inflation and currency
changes are factored in, Summers said in a lecture at the Center for
Global Development, a Washington think tank.
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