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Last Updated: Tuesday, 4 September 2007, 08:51 GMT 09:51 UK
China reserves 'not in sub-prime'
Shanghai commuters
China says most of its reserves are in US Treasury Bonds
China has said its $1.3 trillion (644.7bn) in foreign reserves have not been invested in the US subprime sector, according to state media.

The reserves, the country's foreign exchange regulator told China Daily, include "no holdings of US subprime securities", AFP reported.

Chinese reserves are mainly invested in US Treasury bonds, the newspaper said.

World markets have been roiled by problems in the US subprime sector, which focuses on risky borrowers.

Bank exposure

Problems that were triggered by a rise in US mortgage defaults have impacted worldwide banks that had invested in the subprime sector.

Earlier comments from the China Banking Regulatory Commission stressed that domestic banks had "limited" exposure to subprime problems.

Bank of China, China Construction Bank and Industrial and Commercial Bank of China all revealed their exposure to the US subprime market recently but added that the damage would be limited.

By the end of June, China Construction Bank saw $1.062bn in US subprime mortgage loan-backed securities. The bank allocated 139m yuan ($18.4m; 9.1m)to resolve losses in the sector.

State-lender Bank of China had exposure of $9.65bn to subprime mortgage-related assets in the US while the firm's Hong Kong arm had $1.6bn exposure to the sector.

Investors have been selling off riskier holdings, including debt issued by companies, as worries grow about the number of firms that have been impacted in the US sub-prime crisis.

This in turn has caused a rise in the value of government-backed bonds and bills.

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