(Yicai) Dec. 18 -- China’s orderly cut of US Treasury Bonds is necessary, given the US Treasuries’ low coupon rate and inflated US net overseas debts, according to an academician at the Chinese Academy of Social Sciences.

China should adjust its overseas asset-debt structure faster and increase its return on net foreign assets, Yu Yongding said at the Sanya Forum, The Paper reported yesterday. The country should lower the proportion of foreign exchange reserves in its overseas assets, meaning that it should cut its US Treasuries holdings instead of selling them off, and increase the security of its overseas assets, especially that of forex reserves, he noted.

China cut its ownership of US Treasuries by USD27.3 billion to USD778.1 billion in September from October, down for the sixth consecutive month to a new lowest since May 2009, according to data released by the US Department of Treasury on Nov. 16.

The US debt-to-gross domestic product ratio will continue to climb, so the country’s net overseas debts will keep on deteriorating, also affected by the US Federal Reserve System’s continuous rate hikes, Yu pointed out.

China should keep foreign trade as balanced as possible and maintain imports and exports at a generally balanced level, said Yu, who is also a former member of the monetary policy committee of the People’s Bank of China.

“In a certain period of time, China may experience a trade deficit, but the Chinese economic growth cannot excessively depend on external demand, so we should change the economic growth mode, thus prioritizing the domestic and dual circulation development patterns,” Yu noted.

“To realize this, we should keep the Chinese economic growth at a relatively high level, which requires adopting an expansionary monetary policy to help maintain the security of the country’s forex reserves and overseas assets,” according to Yu.

Stimulating economic growth and boosting the increase of imports via expansionary fiscal and monetary policies can aid China in achieving the balance of payments and optimizing the structure of overseas investment positions, Yu said.

Editor: Futura Costaglione