China will play responsible role in helping continent, bank official says

China is confident that Europe will overcome its problems and will continue to invest part of its foreign exchange reserves in European bonds, a senior central bank official said on Monday.

"We believe that Europe will ultimately overcome the debt crisis through their own efforts as well as with help from the international community," said Yi Gang, vice-governor of the People's Bank of China (PBOC), and head of the State Administration of Foreign Exchange.

"And China will continue to be a 'long-term and responsible' investor in Europe."

Yi was speaking in response to a question on China's holdings of euro assets, including Greek bonds, at a news conference during the annual parliamentary session.

China will continue to diversify its investments in foreign bonds, while keeping risk control a top priority, Yi said. The PBOC under its governor, Zhou Xiaochuan, has been following a prudent policy.

Concerns over safety, liquidity and potential revenues are three major factors affecting government's thinking when it tries to diversify the foreign reserves portfolio, he added.

"Under such principles, we will continue our investment in Europe."

The country's eurozone bonds did not register a loss.

"Instead, the revenue increase was higher than the local inflation rate despite the uncertainties of the debt crisis and economic recovery across the region, which proves diversification worked well."

China had $3.18 trillion of foreign reserves by the end of last year, the largest in the world. About one-third was invested in US Treasury securities, and about 20 percent has been invested in euro-denominated assets.

The PBOC said in a statement on Monday that it will make continued efforts in 2012 to manage the country's reserve assets with "new ideas" and in a more "effective" manner.

Nicola Casarini, research fellow at the EU Institute for Security Studies, said it means that China will further diversify away from the US dollar and invest in euro-denominated assets.

"This trend has accelerated in recent months - Zhou (PBOC governor) is giving a policy framework to what the PBOC has been doing recently. China seems to put more trust in the resilience of the European economy than in the US," Casarini said.

However, Yi's remarks indicated that China would rather invest in industrial and strategic assets in Europe rather than buying more bonds, he said.

"For China, this is also a way to help Europe at this historic juncture. Moreover, this approach allows Chinese leaders to avoid internal criticism of bailing out rich Europe."

Casarini agreed with Yi that the eurozone crisis is now showing signs of improvement, spurred by the second installment of cheap liquidity by the European Central Bank and the policy of austerity implemented by the new Italian government.

In addition, the systemic risks of the eurozone declined as the Greek finance ministry announced it had received sufficient participation from private-sector creditors on Friday to proceed with its proposed bond exchange program, said Wang Tao, head of China economic research at UBS Securities Co Ltd.

Will the NPC ride to the UK's rescue?

All economists' eyes and many of those with a mortgage, a pension, savings, stocks and even a job are on Greece, wondering whether it will default on its sovereign debt.

But what has this got to do with China and the ongoing National People's Congress?

Well, if Greece does default, and in my view the chances are very high, it would leave it being run by a European Commission placeman and former Goldman Sachs banker (with all the baggage that entails), who was forced on the Greeks after their democratically elected prime minister was thrown out under European Union pressure.

Slow recovery, Europe remain biggest uncertainty

The governor of China's central bank said Monday that a slow world recovery process and the unstable economic and financial situation in Europe will be the biggest uncertainty for China's economy this year.

PBOC orders lending to first-home buyers

The People's Bank of China (PBOC), the central bank, said Monday that commercial banks should put in place a differentiated credit policy to guarantee housing loans to qualified first-home buyers.

The remarks by Liu Shiyu, vice governor of the PBOC, came from a press conference on the sidelines of the ongoing annual parliament session.

PBOC: China to continue exchange rate reform

A trade deficit in the first two months this year and its impact on the exchange rate of Renminbi is "a good thing" for China, the governor of China's central bank said Monday.

The supply and demand relations in the market are playing an increasing role in deciding the exchange rate of the Chinese currency, Zhou Xiaochuan, governor of the People's Bank of China (PBOC), said at a press conference on the sidelines of the ongoing annual parliamentary session.

Lowered RRR not to boost stock, property market

China's central bank governor said Monday that cuts on reserve requirement ratio (RRR) were not to boost capital market confidence or improve property market liquidity.

Room for further RRR cuts

China's central bank governor said on Monday that there is ample scope for further cuts in banks' required reserve ratio after it injected about 400 billion yuan ($63.2 billion) into the market by lowering the ratio by 50 basis points last month.

Central bank: no plan for larger banknotes

Hu Xiaolian, deputy governor of the People's Bank of China, the central bank, said here Monday that the central bank is not planning to issue larger denomination banknotes in the short term.

China to continue diversifying holdings of foreign bonds

China's chief foreign exchange regulator said Monday China will continue to implement the principle of diversifying its investment in foreign bonds, saying its holdings of eurozone bonds did not register losses as a portfolio.