Posted on 03/29/2006 7:32:56 PM PST by buglemanster
China has surpassed Japan to become the world’s largest holder of foreign exchange reserves, according to official media reports, but Beijing says the build-up will have no impact on its “gradualist” approach to currency reform.
China’s reserves reached US$853.7bn at the end of February, compared with Japan’s US$850.1bn, the China Business News reported on Tuesday.
The disclosure of the surge in reserves coincided with the emergence of a lengthy defence of exchange rate policy by Zhou Xiaochuan, the governor of the People’s Bank of China, delivered last week in a speech to foreign business executives.
Mr Zhou rejected US pressure for a rapid appreciation of China’s currency to reduce the swelling bilateral trade deficit, saying it would make little difference unless Washington also made significant structural adjustments.
He estimated it would take two to three years for China to achieve a “basic balance in international trade”, but even then, the bi-lateral imbalance with the US might be sustained. “Local economists worry that, even when China has achieved a basic global balance, the US could still be running a high trade deficit – and the problem will not be on the Chinese side,” he said.
“While China has been trying to relieve the problems, complaints are heard that the US has been slow in taking concrete measures to reduce its twin deficits and improve its savings rate.”
However, Mr Zhou offered to co-operate with the US on the issue, saying that priority should be given to “orchestrated structural adjustments.” China de-pegged its currency, the renminbi, from the dollar last July and revalued it by 2.1 per cent, but since then has only allowed it to rise by about another 1 per cent.
Mr Zhou said that the government was confident of allowing “market forces” to play a greater role in setting the exchange rate because of how well Chinese companies had coped with the new regime.
But China’s huge employment pressures and fragile financial system meant that any changes would still have to be rolled out in a “gradualist …and controllable manner.”
The continued rapid build-up of foreign exchange reserves this year suggests that speculative inflows, although they have abated somewhat, are still strong.
The increase in the first two months of this year of about US$35bn is partially accounted for by the trade surplus of US$12bn and another US$5bn-plus in foreign investment, with the remainder largely speculative inflows.
Mr Zhou said in his speech that high levels of foreign reserves in Asia were driven by the scarring experience of the Asian financial crisis in the late 1990s, and by different investment and savings regimes.
He said China’s reform to its currency would take some time to have any impact on the current account balance and direct investment, but that in any case, “if measured by per capita level, China’s foreign reserves are not high.”
The central bank declined to comment on the newspaper reports about the new level of reserves.
Carlos Gutierrez, the US commerce secretary, on Tuesday met China’s commerce minister Bo Xilai and premier Wen Jiabao to press for better access to Chinese markets for US companies.
It is probably the most remarkably foolish circumstance that I can recall: for a great free country to indebt itself so massively to the world's largest totalitarian state.
ping
Oh for crying out loud. Doom and gloom. Snap out of it, man.
For years the Chinese have shipped us televisions, VCRs, DVD players, and enough cheap household items and clothing to fuel the greatest boom in consumerism in human history.
In exchange we gave them IOUs.
ha ha ha ha.
Stupid Chinese. Didn't they learn from the japs?
Anyway, isn't is nice that right now they hold the largest stake in the currency exchange.... when the price of GOLD is going through the roof.
Lighten up dude. I'm ain't worried.
heck, I'm laughing at them, here.
Like a wiseman used to say: If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem.
*J. Paul Getty
Forex?....at first I thought he was talking about rubbers and it was just a typo
The money Chinese companies have is the result of free trade. US companies bought their stuff, marked it up and sold it to Americans. What's the problem ?
How massively are we indebted to China?
We are indebted to the Chinese and the rest of the world, because we need them to keep buying our treasury bills to finance our ever growing federal deficit.
If they ever stop buying, our interest rates will go through the roof. Then, watch out; US and world economic recession.
Indeed, and going further in debt by the day. It very well could mean we have already lost the war to China, before most even knew it had begun.
That they are using to buy US companies, not US products.
The Japanese bought US companies too and real estate like Rockefeller Center. They got shafted.
Japan and China couldn't hardly be more dissimilar. One is a small island, the other one of the largest countries in the world, including the largest population. One is capitalistic, one is communistic. The Chinese can shuffle money around between their business fronts and target whatever industries of ours they like. And it obviously won't be real estate, most of them couldn't leave their country to come here if they wanted to.
The ironic thing is that we even have a multibillion dollar debt to Russia.
Leaving the country is not a problem, everyone can leave. China is not North Korea. The hard part is in getting past American immigration, since there is an immigration quota on every nation (except Mexico it appears).
It's not just a matter of communism or capitalism that makes China more threatening. Communism doesn't work and is inefficient; if China were truly communist, you have nothing to worry about (see USSR).
The real issue is that the Chinese corporate model is radically different from the Japanese. The Japanese system is practically life-term (salaryman) and also top-down bureaucratic; the Chinese system has high turnover and a decentralized parallel management structure. In other words, the Chinese system is more American and more versatile. What this means is that in micro terms, the Chinese system is extremely capitalistic (no welfare state at all), but in macro terms it's also very state-oriented.
Japan isn't becomeing a desert, China is.
Not sure what to make of that news but the fact that a nation where only 7% of the land feeds the nation is in big trouble if desertification is true.
http://www.gluckman.com/ChinaDesert.html
Ping to more propaganda posted by ChiCom troll gogoman/ckwilliams/buglemanster
"The hard part is in getting past American immigration, since there is an immigration quota on every nation (except Mexico it appears). "
Evidently its not too hard. Illegal immigrants from Asia represent 13% of the total.
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