China's official foreign exchange manager is still buying record amounts of US government bonds, despite Beijing's increasingly vocal fear of a dollar collapse, according to officials and analysts.
In recent months, senior Chinese officials, including Premier Wen Jiabao, have repeatedly signalled their concern that current US policies could lead to a collapse in the dollar and global inflation.
But Chinese and western officials in Beijing say China is caught in a “dollar trap” and has little choice but to keep pouring the bulk of its growing reserves into the US Treasury, which remains the only market big enough and liquid enough to support its huge purchases.