Former central bank advisor: China should gradually reduce US Treasury debt

China should gradually reduce the holdings of the United States Treasury debt and optimize the structure of its foreign assets to avoid risks, said a former advisor to the country's central bank.

Yu Yongding, an academician of the Chinese Academy of Social Sciences, said that the US' debt levels may continue to rise relative to the size of its economy, and US continued interest rate hikes may also accelerate the deterioration of its net overseas debt.

"China should reduce the proportion of foreign exchange reserves in its overseas assets. But it doesn't mean that China should dump US Treasury debt, instead, it is necessary to reduce the holdings orderly," he said.

Yu made the remarks at the Sanya Forum held by Caijing Magazine that ended on Sunday. The forum has attracted a slew of leading economists and industry experts from both home and abroad.

"China should step up its efforts to adjust the structure of its overseas assets and liabilities, and increase its income from overseas net assets," Yu said.

"Also, more efforts are needed to improve the safety of China's overseas assets, especially foreign exchange reserves. China should try its best to reduce its foreign exchange reserve to an adequate level that is the internationally recognized," he added.

To maintain the safety of China’s foreign reserves and overseas assets, Yu said that the country should try to maintain a balanced foreign trade as much as possible, and keep its imports and exports roughly in balance.

"The country is expected to take the domestic market as the mainstay over a period of time," he said, adding that expansionary fiscal and monetary policies are needed to drive economic growth and import increase for further balance of payments internationally.