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.
How much?
All this is going to collapse at some point. It's going to make the Enron bankruptcy look like pocket change.
Those currency reserves going to be worthless if the Chinese start something with Taiwan. The Chinese would also have their U.S. investments confiscated if they started something.
Something I read a long time ago. If you own the bank a litlle, the bank owns you. You own the bank a lot of money; you own the bank. Same thing here.
850 billion each to China and Japan, given that almost all of those FX reserves are in US treasury obligations.
Only if you make stuff up, like good old Lurking.
Do you understand what "foreign reserve" means? It's all the foreign currency they own, not just dollars. Did you misread the article? Do you think it said all their reserves are in dollars?
This country has a death wish. Either through "free trade" or massive uninhibited immigration, it has a death wish.
Maybe we don't as it's people, but those maggots in Washington sure have an agenda.
I weep for our grandchildren who will one day wake up as slaves on the continent conquered by their ancestors.
its a large enough number of dollars that if they tried to sell them, even slowly over the course of years, they would destroy the international purchasing power of the dollar. How's that?
Its a big problem, for us and perhaps even moreso for them.
That's funny!
How's that?
Remarkably uninformed. Embarrassing.
Sounds pretty scary. China's State Owned Enterprises (SOE's) and Joint Stock Ventures have been miserable failures. Maybe that's why 60% of all China's exports to the US are produced by firms owned by foreign companies, many of them American. As a matter of fact, foreign-funded enterprises (FFEs) account for about 55 percent of China's total exports. This dominance by foreign firms is even more pronounced when considering advanced industrial exports. For example: In 2003, FFE's accounted for 79% of all China's exports of industrial equipment; 92% of all exported computer equipment and 74% of all electronics and telecom exports. This level of dominance is reflected in almost every other advanced industrial sector in China.
Someday China may export more manufactured goods than we do but the majority of it will be done by companies that are not owned by Chinese or the Chinese government.
Guess the world isn't willing to pay someone $65/hour to pound on hubcaps.
Ok, given that what I just said is pretty much the opinion of everyone on the planet who's looked at it, perhaps you can elucidate for me what the ultimate disposition of those accumulated reserves is likely to be, and how large those reserves will grow between now and the time that disposition occurs. Enlighten me, oh great one!
That's miniscule comparing the total population of Asia (which includes the Middle East, Central Asia, South Asia and Pacific Islands) versus that of Mexico.
Quit ranting here, you are an Indian nationalist and your agenda is obvious, it makes you look foolish to call anyone a troll for you are the ultimate troll. If you have nothing important to contribute here, then stay out, don't barge into every single China-related thread and spew crap. You wouldn't know what propaganda is even if it hit you with a 4x4.
Kinda new here to be ordering people off threads, aintcha?
I am sorry but indcons has been going into every thread calling people names, etc. for the last 2 weeks. He adds nothing to the discussion.
Apparently pointing out facts can get you banned, censored on FR. Some "Free" republic.
No one's forcing anybody to stay.
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