China sees risk from big US debt issuance-official

BEIJING, Feb 13 - Buying U.S. Treasury bonds is an option -- but not the only option -- for China, which is aware that huge debt issuance by Washington would reduce the value of China's existing portfolio, a banking regulator said in remarks published on Friday.

Luo Ping, a director-general at the China Banking Regulatory Commission, was clarifying a Financial Times report that quoted him as saying creditor countries had no choice but to invest their surpluses in U.S. Treasuries.

"For everyone, including China, it is the only option," the FT quoted Luo as saying in New York on Wednesday.

In an elaboration of his remarks, the China News Service paraphrased Luo as saying:"Compared with gold or bonds issued by other countries and regions, U.S. Treasury bonds are still an option (for China).

"But if the U.S. government issues a large amount of Treasury bonds amid efforts to deal with the economic crisis, all investors who hold U.S. Treasuries will suffer losses."

China News Service carried the article on its website, www.china.com.cn.

China, with foreign exchange reserves of about $2 trillion now, is the world's largest holder of U.S. government debt.