China should sit tight on its US Treasuries investment and adopt a "no buy, no sell" strategy, former senior lawmaker Cheng Siwei said on Monday as Asian stocks tumbled on a historic downgrade of US debt rating.

Taking aim at how China should invest its $3.2 trillion in foreign exchange reserves, the world's largest, Cheng said China should use future reserves to buy other bonds and to make foreign direct investments.

Cheng's advice to Beijing, the largest foreign creditor to the United States, to stay calm contrasts with Monday's financial market rout as nervous investors fled riskier assets on fears a second US recession may be looming.

"In my opinion, at this moment, the best strategy is no buy, no sell," Cheng told reporters when asked what Beijing should do with its US debt investment.

"At this moment, it's very difficult to shift (investment), to change fundamentally, because we hold such a big amount."

Analysts estimate 70 percent of China's reserves are invested in dollar assets, and data shows China had $1.16 trillion worth of Treasuries as of the end of May. As such, it is in Beijing's interests to see a healthy US economy.

Even before Standard & Poor's hammered market confidence by stripping the United States of its top-tier AAA credit rating on Friday, Chinese analysts have urged Beijing to diversify its investment and cut it dollar dependence.

Cheng reiterated that stance by saying China could buy some euro zone sovereign debt, but ruled out any large investment.

"I don't think (China will buy) very big amounts. We will buy some according to our situation, our evaluation. But in this case, it's not only an economic or financial issue, also a political issue," he said.

With an eye on China's massive reserves, indebted European governments in Greece, Spain, Italy and Hungary have trooped to Beijing asking for investment in their sovereign debt.

So far, China has bought Greek bonds and has vowed to buy more if needed. It has never disclosed the size of its investment in the euro zone, although economists estimate a quarter of its reserves are held in euro investments.