Socio-Economics History Blog

Socio-Economics & History Commentary

China Wants US Reassurance Over Dollar!

  • The Chinese are definitely concerned about the predicament they are in. Their US$2.3T of USD denominated reserves are keeping many of them awake at night. The reality is: they are caught in a web of their own making. They have kept the exchange rate of the Chines Yuan (CNY) against the USD too low for too long. I sympathize with them though. Their intention was to boost economic growth and employment. They have achieved that to the benefit of all their citizens. The China today is not the China of 5 years ago. The transformation in China is phenomenal.
     
  • The Chinese will never declare outright their strategy on how they are disposing their US$2.3T hoard. So, in official channels there will always be double speak. This is just the ‘Art of War’ strategy of obfuscation, not letting your enemies/competitors see your moves. I have no doubts they are buying gold, oil and hard assets like crazy. However, US$2.3T is a humongous amount for any country to spend.
      
    BEIJING – China’s premier expressed concern about the U.S. dollar and called on Washington on Sunday to take “concrete steps” to reassure Beijing about the safety of its huge Treasury bond holdings.
     
    “Any fluctuation in the value of the U.S. currency is a big concern for us,” Premier Wen Jiabao said at a news conference. “We cannot afford any mistake, how slight it is, when running our financial assets,” he said. “I would like the United States to take concrete steps to reassure investors.”
     
    China has pressed Washington to control its yawning budget deficit and prevent inflation that would erode the value of the dollar and China’s holdings. The premier said Treasury values were a matter of the “national credibility” of the United States.

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March 15, 2010 - Posted by | Economics | , , , , , , , , , ,

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