Forex reserves not invested in US subprime securities

By Zhang Ran (China Daily)
Updated: 2007-09-04 07:04

None of the country's $1.33 trillion foreign exchange reserves is invested in US subprime mortgage-backed securities, a top official from the foreign reserve administration said yesterday.

"China's official foreign exchange reserves have no holdings of US subprime securities," Wei Benhua, deputy director of the State Administration of Foreign Exchange (SAFE), said in Beijing during a financial forum.

Most of China's foreign exchange investment in the United States is focused on treasury bonds. China is currently the world's second-biggest holder of such bonds after Japan.

The ongoing subprime credit crisis had led to big losses among global financial institutions, including the near-collapse of two hedge funds run by Bear Stearns Co, the biggest broker for US hedge funds, in June.

Liu Chunhang, an official with the China Banking Regulatory Commission, said last month that domestic commercial banks had limited exposure to US subprime ills, and that they had set aside adequate provisions for dealing with the problems.

Three commercial banks have invested in US subprime mortgage backed securities.

In their latest financial disclosure in August, Bank of China reported a holding of $8.965 billion in US subprime mortgage-backed loans as of the end of June, accounting for 3.51 percent of the bank's securities' investment.

Industrial and Commercial Bank of China reported a holding of $1.23 billion and China Construction Bank said it had $1.06 billion. The investment in such products account for 0.3 percent and 0.38 percent of the banks' total securities investment.

"The subprime mortgage-backed loans will have limited impact on the three banks," said Yang Dan, analyst with China Chengxin International Credit Rating Co Ltd, a leading local rating agency in which Moody's has invested.

Yang said the agency will not downgrade the three banks' ratings.

(For more biz stories, please visit Industry Updates)