Tang Shuangning, chairman of state-controlled China Everbright Bank, said China should adjust the structure of its reserves and cut the ratio of dollar assets, according to major business newspapers, including Shanghai Securities News and China Securities Journal.

Tang, a former vice chairman of the China Banking Regulatory Commission, was addressing a forum in Beijing Thursday.

Tang’s remarks came one day after Cheng Siwei, vice chairman of China’s national parliament, was reported as saying strong currencies ought to be given more weight in the reserves to offset the losses in weak ones.

“For instance, as the euro is rising against the yuan, and the U.S. dollar is falling against the yuan, the two taken together can effectively make up for any losses, “ Cheng was quoted as saying Wednesday.

Cheng’s remark sent the dollar to a fresh low against the euro as the market took it as a hint that China might diversify its massive foreign exchange reserves away from the U.S. currency.

Neither Tang nor Cheng has a direct say in China’s foreign exchange policies.

China’s forex reserves, which overtook Japan’s for the world’s top spot in early 2006 and topped US$1.43 trillion in late September, have been boosted especially by the nation’s huge trade surplus.

About 70 percent of foreign reserves is generally believed to be held in U.S. dollar-denominated paper, principally U.S. government bonds.

This has proven a less-than-ideal investment, not just due to the low yields on government debt, but also the weakening of the U.S. currency.

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