China says it won''t cut dollar holdings -- but will it stop adding to them?

From Reuters
Saturday, March 4, 2006

a href=http://today.reuters.com/news/articlenews.aspx?http://today.reuters.com/...
type=businessNewsamp;storyid=2006-03-
05T022821Z_01_PEK272629_RTRUKOC_0_US-FINANCIAL-CHINA-RESERVES.xml

BEIJING -- China will not reduce its holdings of dollar-denominated
assets in its foreign exchange reserves, central bank chief Zhou
Xiaochuan said on Sunday.

However, Zhou, governor of the People's Bank of China, did not say
whether the proportion of dollars in the reserves would rise or fall.

Speaking to reporters on the sidelines of the National People's
Congress, or parliament, Zhou said there had been market speculation
that China might reduce its dollar holdings.

quot;The forex reserves are still growing. Some people are concerned
that the amount of dollar assets in the reserves will fall. But
that's not the case,quot; Zhou said.

China had $818.9 billion in reserves at the end of 2005. It does not
disclose the composition of the stockpile.

Zhou said China would adjust the mix of its reserves in light of
global market conditions. In doing so, China's criteria would be
safety, liquidity, and profitability, in that order.

He did not elaborate.

Zhou was also coy about the prospects for the yuan, saying only that
the currency's trend would be determined by supply and demand.

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