Economist advises China to reduce U.S. Treasury securities

Beijing - A prominent Chinese economist is advising the Chinese government to reduce its amount of United States Treasury securities because market demand is strong and is a rare opportunity for the Asian powerhouse.

On Friday, the United States Treasury Department reported that China had reduced its holdings in May by $32.5 billion to $867.7 billion; however, they purchased $3 billion worth of long-term Treasuries, reports the Associated Press. China still remains the world’s largest holder of U.S. debt. According to Business Week., prominent Chinese economist, Yu Yongding, urged the government of China to diversify in assets denominated in a variety of other currencies as well as real goods. Yongding, who is a former academic adviser to the central bank, wrote that right now the market demand is strong and would be a perfect opportunity for China because the move would not have a large impact on prices and China wouldn’t experience any ramifications for its investment. “Although assets in other currencies and forms are not an ideal replacement for U.S. Treasury bonds, diversification should be a basic principle,” wrote Yongding in the China Securities Journal, reports Reuters. “When demand for U.S. Treasury securities is strong, it's a rare opportunity for us to gradually pull back. That way, it will not have a big impact on prices and China will not suffer too much.” Researcher with the State Information Center, Zhang Monan, urged China to purchase hard assets like gold with their $2.5 trillion in foreign reserves, the world’s largest.