The US president, the US treasury secretary and mainland economists yesterday dismissed a British news report saying Beijing had warned of a retaliatory sell-off of US treasuries.
Citing two mainland academics as 'officials at leading Communist Party bodies', The Daily Telegraph had reported that Beijing hinted at liquidating its vast US treasury holdings if Washington imposed sanctions to force a yuan revaluation.
The report followed talks in Beijing last week at which US Treasury Secretary Henry Paulson stressed the need to make the yuan more flexible and avert action by the US Congress against so-called yuan manipulation.
Premier Wen Jiabao had said that any change in foreign reserves investment would not harm the market for US-dollar-denominated assets.
US President George W. Bush said that Beijing would be 'foolhardy' to try to push down the US dollar in retaliation. He questioned the report's reliability.
Suggestions that Beijing was considering selling off dollar-denominated assets to hammer the already weakened greenback were 'absurd', Mr Paulson said.
The mainland had US$1.33 trillion in foreign exchange reserves at the end of June. Mainland researchers estimated that 70 per cent of that was in dollar-denominated assets, including more than US$400 billion in US treasuries.