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Bernanke says China's might no threat
(Reuters/chinadaily.com.cn)
Updated: 2006-02-17 06:59
US Federal Reserve Chairman Ben Bernanke, barraged with lawmakers' questions
on Thursday over rising foreign ownership of U.S. assets, played down fears that
China held enough dollars to endanger the U.S. economy.
Federal Reserve
Chairman Ben Bernanke testifies to the Senate Banking Committee on Capitol
Hill in Washington February 16, 2006.
[Reuters] | In a second day of Capitol Hill
testimony, the new central bank chief was pressed hard by Senate Banking
Committee members about whether soaring U.S. trade deficits, financed by foreign
borrowing, made the economy and the dollar vulnerable.
"I don't think that the Chinese ownership of U.S. assets is so large as to
put our country at risk economically," Bernanke said, minimizing the possibility
that China might suddenly dump some of its U.S. debt.
"It would be very much against their own interest to do so," he said, ducking
a question whether these holdings gave Beijing a potential political lever over
the United States.
US congressional anger toward China has grown along with soaring U.S. trade
deficits that hit a record $725.8 billion in 2005 -- allegedly 28 percent
of that with China alone. However, China puts its trade surplus with the US in
2005 as US$114.20 billion.
But a large part of China's exports to the US are from US-invested
companies, according to Vice Commerce Minister Yi Xiaozhun. Excluding this
factor, Chinese, American benefits from bilateral trade are even.
At the end of 2005, China held some $819 billion worth of U.S. assets, mostly
in Treasury debt. Its U.S. holdings were surpassed only by Japan, which held
$829 billion worth.
Beijing and Tokyo acquired most of their U.S. securities with money they
earned from selling cars, computers and other consumer goods into U.S. markets
-- goods U.S. competitors and some lawmakers argue are kept unfairly cheap
because of currency actions by the Asian nations.
PLAYS DOWN FEARS
Bernanke said if foreign governments announced they were going to buy less
U.S. debt or even sold some, this would not be destabilizing for the United
States.
"I am not aware of any significant changes in plans to hold U.S. dollar
assets by foreign central banks," he said. "My belief is moderate changes in the
holding of dollar assets would not have significant impact on U.S. asset
values."
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