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Tokyo (AFP) Aug 9, 2010 China bought 5.3 billion dollars worth of Japanese debt in June, Japan's finance ministry said Monday, as Beijing further surpasses its previous full-year buying record. China bought 456.7 billion yen worth of securities in June, a Finance Ministry official said. For the first half of the year, China bought 1.73 trillion yen worth of debt, nearly seven times the full-year record of 253.8 billion yen in 2005. In May alone Chinese investors bought a net 735.2 billion yen in Japanese government bonds (JGBs), exceeding the 541 billion yen purchased in the four months previously. China has sought to diversify its vast investments away from the US dollar and Europe since the onset of the financial crisis. Most of the bonds bought by China are thought to be used by the government to manage its foreign reserves. The increase coincides with renewed doubts about the pace of recovery in the United States and Europe and indicates China is putting more of its ballooning foreign exchange reserves into relatively stable Japanese bonds as a result, say analysts. Japan's risk of default is perceived to be much lower than debt-hit Greece or other eurozone countries, even though its gross public debt is nearing 200 percent of GDP, the highest among developed countries. With around 95 percent held by domestic investors, Japanese bonds are seen as a relatively safe bet. As of the end of March, foreign investors owned 4.6 percent, or 31 trillion yen, of outstanding JGBs. China's foreign exchange reserves have ballooned in recent years. The reserves, already the world's largest, grew 25.25 percent to a record 2.447 trillion dollars at the end of March from 1.9537 trillion dollars a year earlier, the People's Bank of China said in April. One way Beijing has diversified its investments is through sovereign wealth fund China Investment Corp, which manages around 300 billion dollars and has been investing heavily in resources companies.
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