Posted on 04/03/2006 9:11:36 PM PDT by ex-Texan
BEIJING (Reuters) - China should gradually reduce its holdings of U.S. debt and can stop buying dollar-denominated bonds, a Hong Kong newspaper on Tuesday quoted Cheng Siwei, a vice chief of China's parliament, as saying.
With China a leading financier of the U.S. current account deficit, Cheng's comments sent the dollar lower against the euro and yen and also pushed down prices of U.S. government bonds.
The Beijing-funded Wen Wei Po daily carried Cheng's comments, made in Hong Kong on Monday, but it was not immediately clear whether they reflected those of top decision makers who determine the content of China's reserves, the world's largest.
Cheng is one of more than 10 vice chiefs of the parliament and usually speaks on economic policy. His rank is equivalent to vice premier, outranking cabinet ministers, but he does not have specific responsibility for economic policy.
"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.
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.
Chinese officials have denied reports they plan to cut the current volume of dollar assets in the reserves.
Cheng also said China should widen the yuan's trading band at an appropriate time, the newspaper said.
Cheng, who made the remarks ahead of President Hu Jintao's visit to the United States, also reiterated calls for Washington to lift its curbs on exports of high-tech products to China.
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 full convertible in the longer time, but it still did not have a timetable, he said.
Things are looking sticky.
Good work... That just made Chinese products more expensive.
BEIJING (Reuters) - China should gradually reduce its holdings of U.S. debt and can stop buying dollar-denominated bonds,...
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America should reduce access of China's exports to America's consumer market, in direct proportion to any such move.
Seriously.
this have anything to do with the move to go after ChiCom copyright/patent piracy?
Does 2 + 2 = 4?
The Russians like this!!! If China goes to Euro's and dumps dollars, the Russian's stash of Euro's goes up in value. Also, it makes it easier for China to buy Russian products on the Euro system, and vice a versa.
There are positives in this.
US dollar down, EU dollar up, makes US goods very competitive in the EU market
* Foreign sources financed 54% of US Federal deficit in 2002, 73% in 2003, and 99% in 2004;
* Total foreign ownership of US Federal deficit currently stands at 45% as of end of 1st half of 2005;
* The US Government currently owes Japan $687 Billion, China $252 Billion, and Korea $62 Billion - together $1.0 Trillion owed to other nations;
* The US Government currently owes $2.0 Trillion to foreign lenders;
Not counting all those mortgage bonds that financed home purchases for the past five year. This Reuters report disappeared but was discovered by Gooogle's news report cache. The $ 7 trillion mortgage bond market was reported to have burst in December, 2005.
Do you like the idea of banks in China, Japan, France, Germany, Saudi Arabia, UAE and Iran owning U.S. mortgages?
I could not think of better news. Some day, some day, Americans will once again make the products we use. Let the Chinese play their Soros games. As much as I despise Wal-Mart, if they could buy a widget from an American manufacturer cheaper than a Chinese one, I imagine they would be going with the American company. Yeah, I don't have a degree in macroeconomics, whatever. All I know is that I'm sick of reading about foreign nations plotting our economic collapse. I relish our establishing a renewed middle-class in the USA. Let there be jobs for the ordinary person! American jobs!
I don't havea problem of overseas company/government/individuals owning US mortages or debt. If worst comes to worst, its not the US thats going to lose out you know, since the assets are located in the US
Wen Wei Po is a commie paper that is used to convey messages the communist leaders want us to hear.
Very good post.
I'll take this apart with a professional later.
You can catch fish whether the tide is coming in or going out.
PING
"America should reduce access of China's exports to America's consumer market, in direct proportion to any such move."
I'll bet that'll never happen, unfortunately...
Also it will be cheaper for tourists to come over here and spend their "hard earned" euros (I'm killing myself) stateside.
China has the American economy by the balls. Americans have been spending beyond their means for years and the Chinese have been financing it with glee. They now have the largest reserve of US currency in the world and should they decide to sell it off, our markets will fall through the floor.
You can print more money and devalue the dollar, but that will lead to inflation.
In short, we're getting cheap goods from China and in exchange, they finance our debts. You know, Iraq war, Katrina, etc. are all financed with debt.
In order for the RMB to strengthen, China will have to sell more dollars - the problem? Chinese are big savers and in banks across China you can save in USD or RMB or any currency. Guess what most people do? They save in USD because it's the world's currency. That means they sell RMB and BUY dollar which devalues the RMB and increase the value of the dollar.
If they sell their dollar suddenly then we'll have a huge spike in interest rates and possibly a credit crunch in the US treasury as the interest rates shot up and treasury values start to fall. Bad situation for businesses and home owners.
That pretty much reflects what is going on in the U.S. today. The America I grew up in is gone forever.
I blame crooked politicians from both parties. I heard Limbaugh an hour ago blaming crooked politicians for our current immigration mess. What say you?
" The U.S. government has financed a swelling budget deficit for four years by relying on non-U.S. investors. They own about 52 percent of the $4.2 trillion of Treasury securities, up from 35 percent as recently as 2002. A study done for the Fed last September said foreign demand lowered 10-year Treasury yields by about 1.5 percentage points.
"Investors from China, which has $854 billion of foreign currency reserves, more than tripled their net purchases since 2004....
"China benefits from low U.S. borrowing costs, which allow Americans to continue to buy the nation's exports. The U.S. trade deficit with China widened to a record $201.6 billion last year as Americans and Europeans imported toys and televisions.."
More here
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