China official urges cut in US debt holding
Tue Apr 4, 2006 2:39 AM ET
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By Kevin Yao and Benjamin Kang Lim

BEIJING (Reuters) - China should trim its holdings of U.S. debt and can stop buying dollar bonds, a vice chief of the national parliament said, rattling markets on Tuesday, weeks before President Hu Jintao visits Washington.

As China is a leading financier of the U.S. current account deficit and holds the world's largest foreign exchange reserves, the comments from Cheng Siwei sent the dollar lower against the euro and yen and pushed U.S. government bond prices down.

The comments could add to the contentious issues that will come up during Hu's visit, notably what some U.S. politicians and companies see as currency manipulation by China, accused of holding down the yuan to gain an unfair trade advantage.

Hong Kong's Beijing-funded Wen Wei Po newspaper carried Cheng's comments, made in Hong Kong on Monday.

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