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China says it will not dump US Treasuries to retaliate(11/23/03)

      China will not retaliate in a developing trade spat with the United States by dumping US Treasuries, a Chinese paper reports, citing the agency in charge of the country's ballooning forex reserves.

    "The nature of our agency is to manage the national forex assets well," an unnamed official with State Administration of Foreign Exchange told the China Business newspaper.

    "To put it simply, we're looking at profits, and as long as we don't get instructions from the central bank, we won't sell US Treasuries in a bid to retaliate," the official was quoted as saying.

    The remarks were made against the backdrop of heated tempers on both sides of the Pacific after the US government, under pressure to protect US jobs, said it would cap imports of Chinese bras.

    US Ambassador Clark Randt was called in by Chinese Vice Minister of Commerce Ma Xiuhong for an emergency meeting Thursday to be told the US decision would have a negative impact China-US trade.

    China's foreign exchange reserves are the second-largest in the world after Japan's, hitting 383.9 billion dollars by late September.

    A large part of this money has been spent buying US Treasuries and other debt instruments, helping to keep American interest rates low.

    If China was suddenly to sell off Treasuries, it could potentially cause US interest rates to rise, wreaking significant damage on the US economy.


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