China would only damage itself if it sold dollars from its $941 billion stockpile of foreign currency reserves, a senior official said on Saturday. Cheng Siwei, vice-chairman of the national parliament, said selling dollar-denominated assets would hurt China by weakening the dollar and the country should diversify its bond purchases.
China's yuan currency this week hit its highest level since it was unpaged from the dollar in July 2005 to float within managed bands. US critics have said the yuan remains artificially cheap.
"The problem we have is if we sell the existing dollar assets, the dollar will go down and it will hurt ourselves," Cheng told Reuters on the margins of a business conference.
Selling the US bonds China has would be "a disaster", he said. Cheng made similar comments in April. Asked what China should do to diversify its reserves, Cheng said: "I don't want to flatter the Europeans, but certainly the eurobond is one of the options."
Cheng praised parliament's passage last month of a long-awaited corporate bankruptcy law as a step closer to a market economy. "We let the market play an important role in supporting the good guys and throwing out the bad guys," he said.
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