Main Bank of China Is in Need of Capital (US T-bill toxic debt dragging down)

NYT ^ | 09/05/08 | KEITH BRADSHER

[TigerLikesRooster]

Main Bank of China Is in Need of Capital

By KEITH BRADSHER

HONG KONG — China’s central bank is in a bind.

It has been on a buying binge in the United States over the last seven years, snapping up roughly $1 trillion worth of Treasury bonds and mortgage-backed debt issued by Fannie Mae and Freddie Mac.

Those investments have been declining sharply in value when converted from dollars into the strong yuan, casting a spotlight on the central bank’s tiny capital base. The bank’s capital, just $3.2 billion, has not grown during the buying spree, despite private warnings from the International Monetary Fund.

Now the central bank needs an infusion of capital. Central banks can, of course, print more money, but that would stoke inflation. Instead, the People’s Bank of China has begun discussions with the finance ministry on ways to shore up its capital, said three people familiar with the discussions who insisted on anonymity because the subject is delicate in China.

[Aussiebabe]

Yep, great point!

[Aussiebabe]

Nope, see post 15.

[Travis McGee]

bttt

[AmericaUnited]

What will all those bunker and gold guys do with all the product they are trying to unload, now that you have destroyed their Armageddon scenario?

[MimirsWell]

The truth is the Chinese will never openly put this “paper” in the market...not a lot of it anyway...its just a question of value...the more they openly put, the less they will get. You forget that the Chinese still have something to lose here...