China cannot invest much of its foreign currency riches in the global commodities market, because doing so would only push up the prices of the raw materials that the economy depends on, the country's top money manager said Saturday.
Yi Gang, head of the State Administration of Foreign Exchange (SAFE), also said that monetary easing in wealthy countries was driving down China's returns on its $2.85 trillion in official currency reserves, the world's biggest such stockpile.
He said it was not a simple matter for China to buy into oil or gold, which have soared in recent days with investors worried that political unrest in Libya could spread through the Middle East.
"Some have argued that we should buy oil, buy gold, buy iron ore, or even buy into companies and land. But it is much easier said than done," Yi said speaking at Peking University.
"If we go into the spot market to buy commodities, we will immediately push up prices ... to extremely high levels, the Chinese people will bear the cost at the end of the day as China is often the key buyer in these markets," said Yi, who is also a vice governor with the People's Bank of China.
As an example, Yi said that China had purchased more than 300 tons of gold last year through normal trade, and that it would have
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