China says most of its reserves are in US Treasury Bonds

The reserves, the country's foreign exchange regulator told China Daily, include "no holdings of US sub-prime securities", AFP reported.

Chinese reserves are mainly invested in US Treasury bonds, the newspaper said.

World markets have been roiled by problems in the US sub-prime sector, which focuses on risky borrowers.

Bank exposure

Problems that were triggered by a rise in US mortgage defaults have impacted worldwide banks that had invested in the subprime sector.

Earlier comments from the China Banking Regulatory Commission stressed that domestic banks had "limited" exposure to subprime problems.

Bank of China, China Construction Bank and Industrial and Commercial Bank of China all revealed their exposure to the US subprime market recently but added that the damage would be limited.

By the end of June, China Construction Bank saw $1.062bn in US subprime mortgage loan-backed securities. The bank allocated 139m yuan ($18.4m; �9.1m)to resolve losses in the sector.

State-lender Bank of China had exposure of $9.65bn to subprime mortgage-related assets in the US while the firm's Hong Kong arm had $1.6bn exposure to the sector.

Investors have been selling off riskier holdings, including debt issued by companies, as worries grow about the number of firms that have been impacted in the US sub-prime crisis.