China's State Administration of Foreign Exchange (SAFE) yesterday denied foreign media reports that alleged that the government agency responsible for China's foreign exchange investments was reviewing its holdings of Euro-bonds.

The initial report was featured in the Financial Times on May 26 and a later report carried by Reuters cited the news contained in the report as leading to falls on the European market as investors worried about China reducing its holdings of European debt.

However, according to a rare official announcement that was published on SAFE's website yesterday, the report in the Financial Times was not true.

"The report is groundless," the announcement said, quoting an unnamed responsible official from SAFE.

The announcement also quoted the official as saying "China supports the package of financial stability measures currently being adopted by the EU and the International Monetary Fund."

"As a responsible long-term investor, China's foreign exchange reserves have always stood firmly by the principle of investment diversification," adding "The European market was, is, and will always be one of major investment markets for China's foreign exchange reserve."

Reports in today's Financial Times said that "Global equity and commodity prices jumped, and government bond yields rose" on the back of SAFE's announcement which also coincided with the announcement of new austerity measures in Spain and positive indicators from Japan.