China seeks assurance on its financial assets in US

Written by fe Bureau | Beijing | Updated: Jan 14 2011, 05:15am hrs
China would welcome assurances its financial assets in the United States are safe, a senior diplomat said on Wednesday, ahead of president Hu Jintaos visit next week, but played down rifts between the two powers.

Chinese vice foreign minister Cui Tiankai said North Korea and other issues that need the two global giants to work together would also come up during Hus January 18-21 trip. Hu will hold talks with President Barack Obama on January 19.

While Obama is certain to press Hu on currency controls, which many in Washington say keeps the yuan unfairly cheap and contributes to the US trade deficit, Cui said Beijing had its own concerns about safety its big holdings of US treasury debt.

China has amassed the worlds biggest stockpile of foreign exchange reserves at $2.85 trillion, an estimated two-thirds of which is invested in the United States.

Regarding the security of Chinas assets in the United States, if the US side can offer a positive statement on that then of course wed welcome that, and it's an issue were paying attention to, Cui told reporters. Underscoring Chinas sensitivity to the issue, an academic adviser to its central bank, Xia Bin, told Reuters that global financial markets are better off with a balance between the dollar and euro, as opposed to having only dollar dominance.

China often seeks assurances on the security of its US investments before any high-level meetings with Washington.

For two years, Chinese premier Wen Jiabao has used his most important press conference of the year to say he is worried about the safety of Chinas US investments.

The nudge was the closest Cui came to chiding the United States in a tone-setting briefing that stressed Beijings hopes for a friction-free visit that will soothe the quarrels over trade, Taiwan, human rights and North Korea that unsettled relations during 2010.

He declined to answer directly questions about the yuan exchange rate, saying it was not his intention to upset markets.

Of course, the visit will also achieve broad and important outcomes in economic and trade cooperation, said Cui.

Hus goal in his visit will be to shore up overall relations, not make breakthroughs, said Sun Zhe, a professor at Tsinghua University in Beijing who studies China-US relations.

The US always wants concrete outcomes from these visits. It will have quite specific expectations for this one. But China hopes that such visits can help achieve overall stability in relations, not necessarily specific outcomes, said Sun.

The politically sensitive trade gap between the worlds two biggest economies widened by 26% in 2010 to $181 billion in Chinas favour, Chinese data showed this week.

The growing gap provides fodder for critics of Beijings tightly controlled currency regime who claim China keeps the yuan cheap to give its exporters an unfair advantage.

The briefing on Hus trip, which touched on a series of sensitive economic and defense issues for the two countries, came as US defence secretary of defense Robert Gates was wrapping up a visit in China intended to defuse military tensions.