27 Feb.
The Feds Ben Bernanke said imbalances created from China’s large holdings of US assets could pose a risk to the financial system.
“It would be a healthier situation if China saved less and we saved more, and as a result they were not accumulating dollar assets so quickly and we had a more balanced financial picture,” Bernanke told the Senate Banking Committee.
“I do think those large capital flows and the potential instability of those flows can be a risk to our financial system,” he said.
Bernanke, who earlier called for China to allow more flexibility in its exchange rate, said keeping the currency pegged to the dollar requires China to buy up a lot of US Treasurys.
China has continued to acquire dollar reserves despite whether the dollar is rising or falling, he said.
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