Euro will be 'less attractive' for China: Fitch

Updated: 2012-02-08 19:38

By Wei Tian (chinadaily.com.cn)

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BEIJING - The euro will be a less attractive option for China as a reserve currency until the debt crisis in the euro zone is resolved, senior executives at Fitch Ratings said in Beijing on Wednesday.

Andrew Colquhoun, Fitch's head of Asia-Pacific sovereign ratings, suggested that countries like China, which are trying to diversify their reserve holdings away from the US dollar, would be less likely to build up positions in the euro as the crisis deteriorates.

Although China needs the euro assets as an alternative investment for its reserve, it is unlikely that it will put big money in the European Financial Stability Fund (EFSF), said Tony Stringer, chief operating officer of Global Sovereigns and Supranationals at Fitch.

Data from the State Administration of Foreign Exchange showed China's foreign exchange reserve stood at 3.18 trillion dollars as of the end of 2011, of which one fifth was believed to be in the form of euro assets.

Stringer warned that the practice will put China's huge reserve at risk, because China may suffer a capital loss if the fund's rating is downgraded.

Chinese Premier Wen Jiabao said earlier this month during his meeting with German Chancellor Angela Merkel that China is willing to "involve itself more" in efforts to resolve Europe's debt issues.

But Wen stressed that efforts made by European countries are still key to resolving the problem, and called on indebted countries to implement proper financial policies that are in line with their national situations.