China may cut its dollar holdings

Sept. 12, 2008 at 11:05 AM
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BEIJING, Sept. 12 (UPI) -- A leading investment bank in China said the country may trim the portion of its currency reserves tied to U.S. dollars.

China holds $400 billion in Federal Home Loan Mortgage Corp. and Federal National Mortgage Association debt, the China Daily reported Friday.

U.S. regulators seized the two government-sponsored mortgage giants, known as Freddie Mac and Fannie Mae, Sunday, as defaulting mortgages led to huge losses in the firms.

"The crisis has made Chinese officials realize it's a bad idea to put all their eggs in one basket," wrote China International Capital Corp. Chief Economist Ha Jiming.

"This will likely lead to greater diversification of foreign exchange reserve investments," Ha wrote.

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