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China slows growth in foreign reserves

April 13, 2009 at 3:07 PM

BEIJING, April 13 (UPI) -- The Central Bank of China said the Chinese government sharply slowed its purchases of foreign bonds in January and February, but picked up the pace in March.

Chinese Premier Wen Jiabao said recently he was concerned with the U.S. economy's ability to back U.S. government debt, The New York Times reported Monday.

In turn, Chinese foreign reserves dropped by $32.6 billion in January, a record, the Times said. In February, they dropped by $1.4 before rising $41.7 billion in March.

Over the first quarter, China's foreign reserves grew by $7.7 billion, far slower than a the first quarter of 2008, when they jumped by $153.9 billion

About two-thirds of China's estimated $1.95 in foreign reserves is tied to U.S. securities, the newspaper said.

A top government monetary policy official, Yu Yongding, said he considered the financial balance between the two countries to be "mainly in favor of the United States."

He also quoted British economist John Maynard Keynes, who said, "If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy."

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