[Orange1998]

If there were to be a financial crisis in China--let me rephrase that--when there is a financial crisis in China, the value of its renminbi debt as expressed in foreign currency will undoubtedly decline.

Interesting and well noted.

[maui_hawaii]

But what motivates them is that it's an off-budget export, job and development subsidy. They don't have to account for it domestically because they don't mark to market. Even if they pile up a trillion dollars in reserves and take a 40 percent loss on it, as they surely will over the next decade, nobody is going to call them to account for that.

P.79

[maui_hawaii]

Regarding the above mentioned 40% evaporation....if anything, this is what is moving China to want to 'diversify' its holdings.

Their gravy train is going to come to an end and they are gonna have to figure out something new pretty damn soon here.