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China calls on U.S. to sell gold reserves

26 November 2010 09:35 (UTC +04:00)

Baku - APA-Economics. The U.S. should cut its government spending and sell some gold reserves to balance its budget and fund its recovery, the Peopleâ€™s Daily overseas edition reported, citing Xia Bin, an adviser to the Peopleâ€™s Bank of China, Bloomberg reported.

The U.S. has to resolve its â€œtwin deficitsâ€ in the government budget and the current account, Xia was quoted as saying. Three ways that may help the U.S. achieve that target include reducing military expenses, selling part of its gold reserves and relaxing some export limits on technology, he said.

â€œThe U.S. has more than 8,000 tons of gold reserves; why canâ€™t it sell some of it since the country wants to raise funds for economic recovery but doesnâ€™t want to add more burden to the fiscal deficit,â€ Xia told the newspaper. He didnâ€™t mention whether China would be willing to purchase any gold from the U.S.

China ranks as the worldâ€™s largest foreign holder of U.S. Treasuries, with $883.5 billion as of Sept. 30, according to the U.S. Treasury Department. China should raise its gold holdings and its 1,054 tons of reserves are inadequate compared with the 8,133 tons held by the U.S. and 3,408 tons by Germany, Meng Qingfa, a researcher at the China Chamber of International Commerce said on Oct. 27.

The U.S. wonâ€™t be able to get to the bottom of the problem if the government keeps relying on printing money, Xia said.

â€œThe financial market in the U.S. is not short of liquidity, and the money canâ€™t get into the real economy,â€ he said. Expanding money supply may not be the answer in the U.S. as the high unemployment there is a structural, instead of a liquidity, issue, Xia said.

The Federal Reserve said Nov. 3 it will buy an additional $600 billion of Treasuries through June. Policy makers, setting a pace of about $75 billion of purchases a month, â€œwill adjust the program as needed,â€ the Fedâ€™s Open Market Committee said in a statement in Washington.