Richard Fisher, president of the Dallas Federal Reserve Bank and a member of the US central bank's policy-setting Federal Open Market Committee, said China had no reason to scale back its holding of US debt.

"I don't see why they would. The Chinese are very sophisticated, they understand us very well," he told reporters in Hong Kong.

"I don't... detect any desire on the part of the Chinese authorities to do anything that might not help us, or upset the apple cart of restoring a good tone in the credit markets and regrowing our economy."

China became the world's top holder of US Treasury bonds last September, and currently holds around 800 billion dollars, according to official US data.

But some Chinese commentators have voiced frustration that Beijing has not found higher-yielding investments for its huge forex reserves and that the huge US stimulus measures could drive down the value of dollar-based assets.

In a rare expression of official concern over Beijing's huge bond holdings, Chinese Premier Wen Jiabao last month called on the United States to safeguard its investments.

Fisher was speaking in Hong Kong as part of his Asian tour, which will see him head to Beijing and Shanghai.

earlier related report
Recession easing, financial stability needed: Fed chief
Federal Reserve chief Ben Bernanke said Tuesday that there were initial signs that the prolonged US recession may be easing but warned of the need for financial stability for full recovery.

He said he saw "tentative signs that the sharp decline in economic activity may be slowing," citing data on home sales, homebuilding and consumer spending, including sales of new motor vehicles.

While a leveling out of economic activity was the first step toward recovery, he said, "To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets.

"We are making progress on that front as well, and the Federal Reserve is committed to working to restore financial stability as a necessary step toward full economic recovery," he said in a speech at the Morehouse College in Atlanta, Georgia.

Bernanke, who has pushed massive monetary expansion to jolt the economy which has been in recession since December 2007, said he was "fundamentally optimistic" about the US economy, the world's largest.

"Today's economic conditions are difficult, but the foundations of our economy are strong, and we face no problems that cannot be overcome with insight, patience, and persistence," he said.

The Federal Reserve, he said, would do its part to help "restore prosperity and opportunity" to the economy, which plunged into recession in December 2007 after a home mortgage meltdown that sent a financial tsunami across the globe.

Bernanke said "the Fed's toolkit remains potent" even though interest rates were close to zero and could not be reduced further, citing for example steps the central bank had taken to unclog credit flow to households and businesses.

But he signaled concern over efforts to restore stability in the housing market, the epicenter of global turmoil.

"Restoring stability to the market for housing and home mortgages has been a particular area of concern," he said.

He said that the Fed had moved to buy mortgage-related securities in the open market, approving purchases of more than one trillion dollars this year of such securities guaranteed by the government-controlled mortgage companies, Fannie Mae and Freddie Mac.

"Certainly, the housing market remains depressed, but lower interest rates and house prices are making houses more affordable," he said.

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