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China's holdings of US Treasuries surge

By Michael Barris in New York | China Daily | Updated: 2013-04-17 09:44

Total portfolio held by Beijing reaches $1.22 trillion in February, up from $1.16 trillion a year earlier

China's holdings of US Treasury securities surged to their highest level in over a year in February, allowing the country to remain the largest holder of US debt while restoring "balance" to its Treasurys portfolio, an analyst said.

China purchased $9.16 billion in long-term securities during the month, raising its total portfolio of Treasuries to $1.22 trillion, from $1.16 trillion a year earlier, according to the Treasury Department's monthly international capital report. Overall global demand for Treasuries rose to $5.66 trillion from $5.11 trillion.

Perry Wong, research director at the Milken Institute, a Santa Monica, California-based economic think tank, says China's more aggressive buying of long-term securities is part of an effort to restore balance to a portfolio thrown out of balance by slower buying a year earlier.

"China's purchases of US securities should be viewed as part of the country's long-term portfolio management," Wong said. "When you look at that, you have to look at multi years," he said. "They pretty much manage it as part of the larger portfolio and as something they have to hold on to."

The results follow Monday's announcement by the National Bureau of Statistics that China's GDP grew at a 7.7 percent rate in the first quarter, less than forecast, but still above the 7.5 percent full-year target. The first-quarter GDP growth lagged the rate of the fourth quarter by 0.2 percentage point, rekindling worries about a global slowdown in growth and overbuilding in China's real estate market.

"I don't think 7.7 percent is an overwhelmingly disappointing number," Wong said. "Or a clear indication that the Chinese economy is in trouble. We shouldn't expect the Chinese economy to grow as robustly as we would wish for."

On the positive side, he said, slower growth "gives the economy time for resources allocation".

Wong cited President Xi Jinping's statements in recent years, as president and as vice-president, that he has no problem with China posting a growth rate below 8 percent. "The argument has been in the past couple of years that China should pay attention to quality growth, rather than numerical growth," Wong said. "From that perspective, 7.7 percent or 7.9 percent or 8 percent - those numbers don't really dictate too much on the long- term fundamentals of the Chinese economy. I rather think that economic growth in the 7 to 8 percent range is fine."

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