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China is now in charge of regulating the international value of the US$, and correlatively of the US interest rate. Was that anticipated by the strategists of the globalization ?
In China News April 4
In China News April 4
China should cut its US debt holding'
(Reuters)
Updated: 2006-04-04 15:11
China should trim its holdings of U.S. debt and can stop buying dollar bonds, a vice chief of the national parliament said, rattling markets on Tuesday, weeks before President Hu Jintao visits Washington.
Cheng Siwei speaks at a Fortune Forum in Beijing in this May 17, 2005 photo. He suggested China cut its holdings of U.S. debt and stop buying dollar bonds on Monday, April 3, 2006. [newsphoto]
As China is a leading financier of the U.S. current account deficit and holds the world's largest foreign exchange reserves, the comments from Cheng Siwei sent the dollar lower against the euro and yen and pushed U.S. government bond prices down.
The comments could add to the contentious issues that will come up during Hu's visit, notably what some U.S. politicians and companies see as currency manipulation by China, accused of holding down the yuan to gain an unfair trade advantage.
Hong Kong's Wen Wei Po newspaper carried Cheng's comments, made in Hong Kong on Monday.
"China can stop buying dollar-denominated bonds, increase buying of U.S. products and gradually reduce its holdings of U.S. bonds," the newspaper quoted him as saying.
"But all these must follow the prescribed order," he said, without setting out that sequence.
An official at the central bank said this was merely Cheng's personal opinion and a reporter present for the speech said Cheng had stressed he was expressing his own views.
"The comments only reflected his academic view. The People's Bank of China has been studying issues regarding the management of foreign exchange reserves," the central bank official told Reuters.
Cheng is one of more than 10 vice chairpersons of the parliament, as well as chairman of the China Democratic National Construction Association, one of eight political parties in China.
"Cheng Siwei is a scholar and at the same time a national leader," said Zhang Zuhua, a former official familiar with the workings of the government. "He often expresses his views as an expert, and doesn't just give bureaucratic talk.
VISIT TO WASHINGTON
Hu meets U.S. President George W. Bush in Washington on April 20. U.S. officials say Hu's visit will focus on trade issues as the Bush administration seeks to narrow its trade gap with China, which the U.S. claims hit a record $202 billion in 2005.
Analysts say China has been gradually diversifying away from dollar assets in its foreign exchange reserves but fears of a collapse in the U.S. currency will prevent it from making any dramatic shift.
It has been a big buyer of U.S. government bonds, helping to finance the U.S. current account deficit and keep American interest rates low. Investors watch closely for any sign that Beijing might shift the government's investment mix.
Central bank chief Zhou Xiaochuan said last month that China would adjust the mix of its reserves in light of global market conditions. In doing so, China's criteria would be safety, liquidity and profitability, in that order.
China held $262.6 billion of U.S. Treasuries as of January, dwarfed by Japan's holding of $668.3 billion, according to U.S. Treasury data.
Chinese officials have denied reports they plan to cut the current volume of dollar assets and analysts say China may have to buy more U.S. assets as the country's foreign exchange reserves have been growing rapidly, driven by the inflows of dollars from its trade surplus, foreign investment and hot money.
Cheng also said China should widen the yuan's trading band at an appropriate time, the newspaper said.
But China must keep the yuan "relatively" stable in the near term and avoid an "excessively" high rise in foreign exchange reserves, he said.
The country would make the yuan fully convertible in the longer term, but it still did not have a timetable, Cheng said.
(Reuters)
Updated: 2006-04-04 15:11
China should trim its holdings of U.S. debt and can stop buying dollar bonds, a vice chief of the national parliament said, rattling markets on Tuesday, weeks before President Hu Jintao visits Washington.
Cheng Siwei speaks at a Fortune Forum in Beijing in this May 17, 2005 photo. He suggested China cut its holdings of U.S. debt and stop buying dollar bonds on Monday, April 3, 2006. [newsphoto]
As China is a leading financier of the U.S. current account deficit and holds the world's largest foreign exchange reserves, the comments from Cheng Siwei sent the dollar lower against the euro and yen and pushed U.S. government bond prices down.
The comments could add to the contentious issues that will come up during Hu's visit, notably what some U.S. politicians and companies see as currency manipulation by China, accused of holding down the yuan to gain an unfair trade advantage.
Hong Kong's Wen Wei Po newspaper carried Cheng's comments, made in Hong Kong on Monday.
"China can stop buying dollar-denominated bonds, increase buying of U.S. products and gradually reduce its holdings of U.S. bonds," the newspaper quoted him as saying.
"But all these must follow the prescribed order," he said, without setting out that sequence.
An official at the central bank said this was merely Cheng's personal opinion and a reporter present for the speech said Cheng had stressed he was expressing his own views.
"The comments only reflected his academic view. The People's Bank of China has been studying issues regarding the management of foreign exchange reserves," the central bank official told Reuters.
Cheng is one of more than 10 vice chairpersons of the parliament, as well as chairman of the China Democratic National Construction Association, one of eight political parties in China.
"Cheng Siwei is a scholar and at the same time a national leader," said Zhang Zuhua, a former official familiar with the workings of the government. "He often expresses his views as an expert, and doesn't just give bureaucratic talk.
VISIT TO WASHINGTON
Hu meets U.S. President George W. Bush in Washington on April 20. U.S. officials say Hu's visit will focus on trade issues as the Bush administration seeks to narrow its trade gap with China, which the U.S. claims hit a record $202 billion in 2005.
Analysts say China has been gradually diversifying away from dollar assets in its foreign exchange reserves but fears of a collapse in the U.S. currency will prevent it from making any dramatic shift.
It has been a big buyer of U.S. government bonds, helping to finance the U.S. current account deficit and keep American interest rates low. Investors watch closely for any sign that Beijing might shift the government's investment mix.
Central bank chief Zhou Xiaochuan said last month that China would adjust the mix of its reserves in light of global market conditions. In doing so, China's criteria would be safety, liquidity and profitability, in that order.
China held $262.6 billion of U.S. Treasuries as of January, dwarfed by Japan's holding of $668.3 billion, according to U.S. Treasury data.
Chinese officials have denied reports they plan to cut the current volume of dollar assets and analysts say China may have to buy more U.S. assets as the country's foreign exchange reserves have been growing rapidly, driven by the inflows of dollars from its trade surplus, foreign investment and hot money.
Cheng also said China should widen the yuan's trading band at an appropriate time, the newspaper said.
But China must keep the yuan "relatively" stable in the near term and avoid an "excessively" high rise in foreign exchange reserves, he said.
The country would make the yuan fully convertible in the longer term, but it still did not have a timetable, Cheng said.
But they didn't make the claim here. You did. Shouldn't you be able to back up your own statements? And you say that the US doesn't believe in free trade. Can you back up your claims?
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