Sending a clear message to the US not to act against its "core interests", China, sitting on a mountain of US debt said today it would consider investing more forex reserves in gold "cautiously" based on market conditions than American bonds.
In a press meet today, Yi Gang, who heads the State Administration of Foreign Exchange and is also the Vice Governor of the People's Bank of China said, China's investment in US treasury bonds depend on market behaviour and should not be politicised.
But his statement that Beijing will look into investing more forex reserves in gold "cautiously" on market conditions sparked off speculation that China may ease more US bonds to buy gold.
China sold $ 34 billion worth of US government bonds in December, triggering fears that Beijing is using its financial muscle to convey a strong message to the US that it has lost confidence in view of growing US deficit.
After the sale, by far the highest in a decade, China lost the position of the largest overseas holder of US treasury bonds to Japan, which has $ 768.8 billion. China ended 2009 with $ 755.4 billion worth of US debt.
The sale took place days after Chinese Prime Minister Wen Jiabao said China is "concerned about the safety" of its assets.