China should guard against risks from "excessive" holdings of US assets as Washington could pursue a policy to weaken the dollar, a senior currency regulator said in comments published on a website that briefly pushed the dollar lower. However, the comments by Guan Tao of the State Administration of Foreign Exchange were quickly removed from the website at his request. He told Reuters the comments had been made in private academic discussions and represented his personal view only.
"We must be alert of economic and political risks in excessive holdings of US dollar assets," Guan, head of the international payment department at SAFE said in the article on the website of China Finance 40 Forum, a Beijing-based think-tank of Chinese economists, bankers and officials. (www.cf40.org.cn)
"The United States has taken an expansionary fiscal and monetary policy to stimulate economic growth, and the United States may find it hard to resist the policy temptation of weakening the dollar abroad and pushing up inflation at home," he said. Chinese officials have blamed ultra-loose US monetary policy for fuelling global inflation and asset bubbles but they tend to be less vocal about China's huge holdings of US assets for fear of roiling the currency market.
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