CHINA needs to guard against volatility in United States Treasury prices should investors demand higher returns from US government debt, a researcher at the Chinese central bank said yesterday.
Zhang Jianhua, a head of research at the People's Bank of China, said worries the heavily indebted US government may not repay its debt could drive Treasury yields higher and cause US debt prices to fluctuate.
Investor concerns that US Treasury yields may spike higher came to the fore last week when Standard & Poor's threatened to cut the US's prized AAA credit rating unless it cuts its yawning budget deficit.
As the biggest foreign buyer of US Treasuries, China is especially sensitive to fluctuations in US debt prices and has periodically sought assurances that its investments would be protected.
But price volatility aside, Zhang was otherwise confident that demand for US Treasuries would stay healthy due to lack of investment alternatives.
China owned US$1.154 trillion in US government debt in February, data showed.