November 09, 2009

China Calls on U.S. to Control Deficit

Nov. 9 (Bloomberg) -- Chinese Premier Wen Jiabao urged the U.S. to limit the size of its deficit to ensure the stability of the dollar, Reuters reported.

America should play a responsible role in contributing to a global recovery, Wen was quoted as saying yesterday at a briefing in Sharm el-Sheikh, Egypt. It should keep the deficit at an appropriate size, the premier said.

Wen is renewing concerns expressed in March, when he said he was “worried” about China’s holdings of Treasuries and wanted assurances that the nation’s U.S. investments were safe. The dollar fell today after the Group of 20 governments agreed to keep stimulus measures and remained silent on the greenback’s decline this year.

The U.S. currency has dropped about 13 percent against a basket of currencies of major trading partners in the past seven months and the International Monetary Fund indicated in a Nov. 7 report that it may still be overvalued.

China’s foreign-exchange reserves climbed to a record $2.273 trillion in September and the nation is the largest holder of U.S. Treasuries, owning $797.1 billion of the securities in August.

China is closely watching its U.S. assets, which are a very important part of the nation’s wealth, Wen was quoted as saying. He reiterated that his government sought safety, liquidity and good value when investing its currency holdings.

China is facing calls to let its own currency gain against the dollar.

Chinese central bank Governor Zhou Xiaochuan told Bloomberg News on Nov. 6 that “the pressure from the international community to allow yuan appreciation is not that big,” deflecting calls from Europe and Japan to let it rise.

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