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.
If you can't face facts there isn't anyway to debate with you.
Put it this way, 1 year ago, the number of CELL PHONE SUBSCRIBERS (not cellphones!) was 230 million. This year, it exceeded 300 million and closing in on 400 million. The CCP is only what, 60 million members, so your assertion that their economy benefits only the CCP is false and you really can't be an official in China without being a CCP member.
Granted, that still leaves 800 million people and a lot of it are in those factories that you're talking about. However, the number of middle class in China IS growing and cellphone subscribers are one of the easiest indicators (and more importantly, the growth of the cellphone subscribers).
A cellphone in China costs the consumer $20 USD. A cellphone in the US is sometimes FREE dependent on whether you subscribe to a plan or not.
See for yourself:
http://www.forbes.com/home/feeds/afx/2005/05/24/afx2053116.html
Don't forget Princelings, PLA officers, ex-officers, hangers-ons, and affiliates. That is a huge 'multiplier' of just the party base.
And if you are a "business owner" in Shanghai, or Tianjin or Beijing...or anywhere in the major cities on Mainland China...then you owe the party for the privilege of being allowed to stay in business. Ever wonder why they had to put in a special provision in their "constitution" to protect foreigner's investment?
But not the super-duper phones like mine. Or like Blackberries, etc.
Asia is not a nation -- it's a continent consisting of over half the world's population.
Yes. I must admit, I'm a little puzzled about the entire thing -- if we were say France and endebted to China in US$, then it would be a problem, but we are the US and we are endebted to them in our own currency. They just hold IOUs with no gold standard to back them, they are also at our mercy if we decide to devalue our money (after the yuan is freed from the rate of 8.14 to the dollar)
"Asia is not a nation -- it's a continent consisting of over half the world's population."
And where did I say it was a nation? Its surprising to me that there are that many illegals from Asia considering the travel difficulties.
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