China rules out ‘nuclear option’ on T-bills

Geoff Dyer and Peter Garnham
Financial Times
July 8, 2010

China has delivered a qualified vote of confidence in the dollar and US financial markets, ruling out the “nuclear option” of dumping its huge holdings of US government debt accumulated over the last decade.

But the State Administration of Foreign Exchange, which administers China’s $2450bn in reserves, the largest in the world, also called on Washington and other governments to pursue “responsible” economic policies.

The statement on Wednesday, one of a series that Safe has issued in recent days in an apparent effort to address criticism about its lack of transparency, also played down the chances of China making major further investments in gold.

Safe’s comments coincided with the news that China had made record purchases of Japanese government bonds in the first four months of the year, helping push the yen to an eight-month high against the dollar.

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