China denies report it is reviewing eurozone debt

BEIJING: The agency that manages China's $2.5 trillion foreign reserves denied a news report Thursday that it is reviewing its holdings of eurozone debt and expressed confidence Europe will restore financial stability.

The statement by the State Administration of Foreign Exchange, which rarely comments on its activities, came after the report by London's Financial Times newspaper caused the euro and U.S. stocks to fall in New York trading.

``This report is groundless,'' the agency said on its Web site. ``The European market in the past, present and future always will be one of the major investment markets for the State Administration of Foreign exchange.''

It expressed confidence that Europe will restore ``stability and healthy development'' in its financial markets with international help.

The FT, citing unidentified banking sources, said SAFE officials met recently with foreign bankers to discuss eurozone debt bonds issued by countries that use the euro as their official currency. It gave no indication the government had decided to make any changes.

The composition of China's reserves is secret but economists believe about 70 percent is in U.S. dollar assets, mostly Treasury and other American government debt, and the rest in euros and a small amount of yen. That would make the euro portion more than $600 billion.

Beijing has expressed concern about the stability of Greece, Ireland, Italy, Portugal and Spain but is believed to hold little of their debt. Its conservative strategy for its reserves stresses safety and liquidity over profitability.

Beijing has tried in recent years to diversify its holdings away from dollars and any reduction in euro holdings would represent a major change in direction.