Bloomberg News

China Foreign Exchange Manager Calls U.S. Global ‘Bright Spot’

December 25, 2012

The U.S. may be a “bright spot” for the global economy in 2013, with Europe and Japan “not optimistic,” said the official who oversees day-to-day management of China’s $3.3 trillion foreign exchange reserves.

Credit expansion and the development of the alternative energy industry will help make the U.S. “the major power promoting global economic growth in the future,” said Huang Guobo, director of the foreign exchange reserves management department at China’s State Administration of Foreign Exchange. A summery of Huang’s comments, made Dec. 16 at Tsinghua University’s Shenzhen campus, was published on a school website today.

China, the largest foreign lender to the U.S. government, increased its Treasuries holdings in October to a five-month high of $1.16 trillion, according to U.S. Treasury Department data released on Dec. 18. SAFE doesn’t publish data on its investments and Huang, also the foreign exchange regulator’s chief economist, didn’t directly comment on China’s holdings.

“Buying U.S. treasuries is a good choice for China now because the dollar is expected to appreciate,” Liu Dongliang, a foreign exchange analyst with China Merchants Bank in Shenzhen, said by phone today. “Also, the credit risk of U.S. government debt is lower than European and Japanese bonds.”

Huang said Europe and Japan have seen weak growth and contraction and their governments and private businesses are reducing leverage, clouding the outlook for their economies.

The global economy also faces uncertainties stemming from the U.S. “fiscal cliff,” Huang said. Federal Reserve Chairman Ben S. Bernanke used the metaphor to refer to more than $600 billion in spending cuts and tax increases set to take effect in January if Congress doesn’t act.

The “lingering” debt crisis in Europe and quantitative policy easing by major central banks were also cited by Huang as reasons for uncertainty.

China won’t roll out big stimulus policies in 2013, Huang said. Authorities still have room to tweak monetary and fiscal policy, he said.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net; Zheng Lifei in Beijing at lzheng32@bloomberg.net

To contact the editors responsible for this story: John Liu at jliu42@bloomberg.net; Paul Panckhurst at ppanckhurst@bloomberg.net


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