China rules out investing forex reserves to bail out EU debt

Beijing: China today ruled out investing much of its $3.2 trillion foreign reserves to bail out EU countries from their sovereign debt crisis even as its exports to US registered a 17 percent increase, touching $363 billion.

China cannot use its foreign exchange reserves to rescue other countries, Vice-Foreign Minister Fu Ying said asserting that “the argument that China should rescue Europe does not stand, as reserves are not managed that way”.

She stressed that China’s $3.2 trillion foreign reserves should be managed under the principles of “safety, liquidity and proper profitability”.

[caption id=“attachment_147297” align=“alignleft” width=“380” caption=“Vice-Foreign Minister Fu Yinghas said that Chinacannot use its foreign exchange reserves to rescue other countries.Reuters”]  [/caption]

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“China’s purchases of European bonds, International Monetary Fund bonds and US bonds are also based on those principles,” Fu was quoted by the official media today.

China already invested over $1.25 trillion in US debt, which it finds difficult to extricate as it fears that any attempt to pull out could hurt American economy further, which in turn could heavily dent its exports to US, China’s second largest trade partner.

Chinese Commerce Minister Chen Deming said yesterday that China-US trade rose 17 percent year-on-year to reach $363 billion in the first ten months of the year. The increase led to China and the US becoming each other’s second-largest trading partners, Chen said at a dinner held by the American Chamber of Commerce in China (AmCham-China).

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Trade between China and the US will likely exceed $400 billion in 2011 and the figure will further increase in 2012 according to forecasts from the ministry and customs authorities, Chen said. “Next year will be a difficult year (for global economy), and a year in which China and the United States should deepen cooperation and join hands in coping with the crisis,” Chen said.

PTI