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China Official Warns Of Excessive US Assets

From a feigning ignorance (about the real US policy here) Reuters:

China official says U.S. could pursue weak dollar policy

By Kevin Yao And Zhou Xin
June 7, 2011

BEIJING (Reuters) – China should guard against risks from "excessive" holdings of U.S. assets as Washington could pursue a policy to weaken the dollar, a senior currency regulator said in comments published on a website that briefly pushed the dollar lower.

However, the comments by Guan Tao of the State Administration of Foreign Exchange were quickly removed from the website at his request. He told Reuters the comments had been made in private academic discussions and represented his personal view only.

"We must be alert of economic and political risks in excessive holdings of U.S. dollar assets," Guan, head of the international payment department at SAFE said in the article on the website of China Finance 40 Forum, a Beijing-based think-tank of Chinese economists, bankers and officials.

"The United States has taken an expansionary fiscal and monetary policy to stimulate economic growth, and the United States may find it hard to resist the policy temptation of weakening the dollar abroad and pushing up inflation at home," he said.

Especially since that is already happening. But you dare not speak the truth about that in China — or America.

The dollar, broadly lower on the day over market worries about the health of the U.S. recovery, edged down slightly further after Guan’s remarks. It hit a one-month low against a basket of currencies and the euro and a record low versus the Swiss franc.

Chinese officials have blamed ultra-loose U.S. monetary policy for fuelling global inflation and asset bubbles but they tend to be less vocal about China’s huge holdings of U.S. assets for fear of roiling the currency market

In other words, they also have to dissemble and pretend this isn’t happening, in order to not take a huge economic hit.

Congress is locked in tense negotiations over a deal to reduce the deficit and raise the $14.3 trillion debt limit under pressure from ratings agencies

Note that there we don’t hear directly from the Chinese about the supposedly all important debt ceiling debate. You would think of the three options: 1) raise the limit, 2) cut spending, or 3) print more money — the Chinese would want us to take the second position, which would strengthen the dollar the most.

Which is probably why we will never hear their thoughts on the subject.

China has never published its holdings of U.S. Treasuries, but some economists have said as much as 70 percent of the country’s foreign exchange reserves, which hit a record $3.05 trillion at the end of March, are parked in dollar assets

Suckers!

By the way, the original headline for this Reuters article was: ‘China official warns on "excessive" holdings of U.S. assets.’ Apparently the editors thought that was too alarming, so they dialed it back a little.

This article was posted by Steve on Tuesday, June 7th, 2011. Comments are currently closed.

5 Responses to “China Official Warns Of Excessive US Assets”

  1. Petronius says:

    Seventy percent is a high estimate. China has foreign exchange reserves of $3 trillion and about half of that amount is in US dollar denominated paper.

    China announced it intends to diversify $2 trillion of its reserves. It has been slowly but steadily divesting itself of US Treasuries. China’s ownership of US debt has decreased in each of the last five months on record (Nov 2010 – Mar 2011). As a result, the US dollar will come under further pressure.

    China wants to diversify about 10% of its reserves out of paper into gold, which translates into a massive gold accumulation program.

    China is busy buying all oil, energy, natural resources, farmland, and other hard assets it can get. The Chinese are locking up global resources wherever they can find them. Meanwhile the US government fritters away America’s wealth on wasteful stimulus programs, political payoffs, redistribution schemes, draconian environmental programs, and no-win wars.

    However, higher food and fuel prices are also bringing the Chinese economy under pressure. Popular unrest is building, and the Chinese governors are getting worried.

    Gold and safe haven currencies like the Swiss franc will remain strong while Chinese demand continues, and while threat of US fiscal, monetary, or financial crisis continues, interest rates remain low, the US dollar continues in its long-term decline, chaos continues in the MidEast and oil prices stay high — or, in other words, while Nerobama’s regime remains in power and the global economic effects of his policies linger.

  2. Rusty Shackleford says:

    “China is busy buying all oil, energy, natural resources, farmland, and other hard assets it can get. The Chinese are locking up global resources wherever they can find them. Meanwhile the US government fritters away America’s wealth on wasteful stimulus programs, political payoffs, redistribution schemes, draconian environmental programs, and no-win wars.

    Badda-bing, Badda-boom. Faggeddabaddit.

  3. Tater Salad says:

    While China is “warning us” about excessive holdings of U.S. assets, our liberal Obama regime is training their Chinese students in American Universities:

    We/our kids are getting the shaft/screwed by our government and universities. U of M is one of them. The Chinese students in droves are stealing our kids futures. What is Obama doing about this………….nothing! His regime is behind it.

    http://www.china-threat.com/

  4. Liberals Demise says:

    When we default on our loans (and it looks like we are going to) China could be
    pissed enough to fire a few of their missiles (with American gyros) at us in retaliation.
    The real first black President sold our gyros to the chi-coms. “Thanks” Bubba …
    …… arse hole!

  5. Right of the People says:

    “You payee much plenty quickee, chop chop,” comment by Guan Tao of the State Administration of Foreign Exchange


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