Indiana Grain Company, LLC

Posted: 03/09/10

By: tomgrisafi

China's chief currency regulator said the world's most populous nation would attract more capital inflows this year, partly reflecting expectations of a stronger yuan, but he left the market none the wiser as to when Beijing might let the currency resume its rise.

"The U.S. Treasury market is the world's largest government bond market. Our foreign exchange reserves are huge, so you can imagine that the U.S. Treasury market is an important one to us," Yi Gang, head of the State Administration of Foreign Exchange (SAFE), told a news conference.

The exact composition of China's reserves, the world's largest, is a state secret and the subject of intense scrutiny by global investors aware that, with such large sums at stake, even marginal portfolio shifts have the potential to move markets.

Speaking during the annual session of parliament, Yi expressed the hope that China's presence in the U.S. Treasury market would not become a political football. China, he stressed, was not in the game of short-term currency speculation.

"It is market investment behavior, and I don't want it to be politicized," he said. "We are a responsible investor, and we can surely achieve a win-win result in the process of investing."

Yi dampened hopes of gold bugs that China might be itching to add to the 1,054 tonnes of the metal in its reserves.

On a 30-year horizon gold was not a great investment, he said, and China would simply drive up prices if it piled into the market.

Source: WSJ, BusinessWeek, CNBC

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