China won't push down dollar in absence of serious dispute

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BEIJING, Aug 9 (AFP): China will not sell off its US dollar assets as long as there is no major disagreement with the United States, a researcher at a top government think tank said today.
Zhang Ming, an economist with the top Chinese Academy of Social Sciences, made the remark after US President George W. Bush said China would be "foolhardy" to attempt to push down the dollar in retaliation for US pressure over Beijing's alleged currency manipulation.
"As long as there are no big upheavals in the American economy and there is no serious dispute between China and the United States, the Chinese government will not sell off US dollar assets in any major amounts," Zhang told AFP.
He said that China would stand to lose, too, if the dollar plunged as a result because an estimated two thirds of its 1.3- trillion-dollar foreign exchange reserves are tied up in US- dollar assets, mostly Treasury bonds.
"Neither China nor the United States would rashly touch the yuan exchange rate," Zhang said.
Bush earlier warned against any attempt by China to hit back at Washington if US lawmakers pressed for sanctions over the yuan when asked to comment on a report that Beijing was considering such a move in Britain's Daily Telegraph newspaper.
"That would be foolhardy of them to do that," Bush said in an interview with Fox News, adding he doubted the report was based on sources from the office of Chinese President Hu Jintao.
"If that's the ... position of the government, it would be foolhardy for them to do this."
Faced with a massive and growing trade deficit with China, US lawmakers are pushing for legislation to allow for sanctions against Beijing over what is seen as its manipulation of the yuan exchange rate to gain a trade advantage.