By Bloomberg News Jan. 28 (Bloomberg) — China shouldn’t buy a “large chunk” of Greek government debt to help rescue the nation because the securities are more risky than U.S. Treasuries, said Yu Yongding , a former adviser to the Chinese central bank. Greece has a lower debt rating than the U.S. and its statistics have been “sharply” criticized by the European Commission, said Yu, currently a member of the Chinese Academy of Social Sciences, a government-backed research body. The Greek Finance Ministry yesterday “categorically“ denied a report in the Financial Times that it is wooing China to buy as much as 25 billion euros ($35 billion) of its bonds. “It is unreasonable for an economist to support a diversification away from an unsafe asset class to a much more unsafe asset class,” Yu said in an e-mailed response to questions. “Let European governments and the European Central Bank rescue Greece.” China wants to improve management of its $2.4 trillion foreign-currency reserves by both seeking safety and increasing the value of its holdings, the State Administration of Foreign Exchange said on Jan. 6 after its annual work meeting. Chinese investors cut their holdings of U.S. Treasuries by $9.3 billion in November to $789.6 billion in November, Treasury Department data show. Yu’s views have received official backing before. In February, he called for China to seek guarantees that its investments in Treasuries won’t be eroded by “reckless policies.” A month later, Premier Wen Jiabao did just that during an annual session of parliament. Yu was picked by the China Daily to grill U.S. Treasury Secretary Timothy Geithner in Beijing in June about risks that the record U.S. fiscal deficit would undermine the value of its debt. Greek Fund Raising Greece is seeking to raise funds from global investors to reduce a budget deficit of almost 13 percent of gross domestic product, the biggest shortfall in the European Union. The government sold 8 billion euros of five-year bonds with a coupon of 6.1 percent this week. The Greek Finance Ministry said yesterday it plans to reduce the deficit to 3 percent of GDP by 2012. Finance Minister George Papaconstantinou said on Jan. 20 that the government is considering bond issues in Asia and the U.S. and may market debt to Greek retail investors. The country is rated A2 by Moody’s, the fifth-lowest investment-grade, and two steps lower at BBB+ by S&P. The U.S. has the highest rating from Moody’s and S&P. An official in SAFE’s press department who asked not to be named yesterday said he hadn’t heard about the plan for China to buy Greek debt and declined to comment. “Even if pricing is attractive, one key problem for Greek government bonds is the lack of credibility,” Yu said. “We trust U.S. statistics on debt and deficits. The numbers are not pretty but we have a pretty good idea, so we would know what we are buying. In contrast, Greece’s statistics have been sharply criticized by the European Commission.” — Belinda Cao , Natalie Weeks . Editors: Sandy Hendry , James Regan To contact the Bloomberg news staff on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
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China Shouldn’t Rescue Greece by Buying Debt, Ex-Central Bank Adviser Says
