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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jan-09-06 05:10 PM
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WP: China Losing Confidence in the Dollar
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SHANGHAI, Jan. 9 -- As China's industrial juggernaut has flooded foreign ports with cheap factory-made goods in recent years, its central bank coffers have filled with the bounty flowing back to these shores -- a stash of foreign exchange now exceeding $800 billion. China's leaders have steadily invested the bulk in one primary vehicle: the U.S. dollar.

But on Monday came the latest recent sign that China has grown worried about tying its savings so closely to the dollar, a currency that many economists think is due for a fall. A senior economist at China's State Council -- the equivalent of the cabinet -- said in an interview that China is moving toward a new policy of buying fewer U.S. Treasury bills while shifting slightly toward buying assets that trade in other currencies.

China now boasts the world's second-largest stock of foreign exchange reserves after Japan, and with roughly three-fourths of those holdings now invested in the U.S. dollar and dollar-backed assets such as bonds and real estate, even a slight shift in the composition of China's investments could push the value of the greenback down, some analysts said.

The comments of the senior economist, made on condition of anonymity because he is not authorized to speak to the press, confirmed an analysis in Monday's Shanghai Securities News stating that China is inclined to shift some its savings into other currencies such as the euro and the yen, or into major purchases of commodities such as oil for a long-discussed strategic energy reserve.


Many economists anticipate a significant slide in the value of the dollar if the United States' trade and fiscal deficits continue growing. In recent years, the dollar has been propped up by aggressive purchases by China, Japan and oil-exporting countries. Some economists warn that this has made U.S. prosperity dependent on the willingness of foreign powers to continue financing America's profligate ways. If foreigners lose their appetite for U.S. Treasuries, the dollar would drop, increasing the cost of imported goods in the United States and likely forcing the U.S. Federal Reserve to lift interest rates, perhaps bursting what is widely seen as an investment bubble in the real estate market, sending prices plummeting.

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  -WP: China Losing Confidence in the Dollar UpInArms  Jan-09-06 05:10 PM   #0 
  - Oh joy. Another * fiasco.  FloridaPat   Jan-09-06 05:12 PM   #1 
  - Not a * fiasco. The * agenda.  iamahaingttta   Jan-09-06 05:17 PM   #3 
  - And Warren Buffet's bet against the Dollar  ShockediSay   Jan-09-06 06:43 PM   #14 
  - and bush* says:  radfringe   Jan-10-06 03:04 AM   #35 
  - China will leave us in the financial dust in this century.  onehandle   Jan-09-06 05:14 PM   #2 
  - NAFTA, et al, we all saw it coming.  HypnoToad   Jan-09-06 05:23 PM   #5 
  - I hear Ye  hogwyld   Jan-10-06 08:38 AM   #38 
  - * didn't cause the problem, but he HAS brought it breaking point  HypnoToad   Jan-09-06 05:22 PM   #4 
  - The * plan is to bankrupt the US and lead us into a glorious new Dark Age  Vincardog   Jan-09-06 05:25 PM   #6 
  - Compassionate conservatives  HypnoToad   Jan-09-06 05:29 PM   #8 
  - Methinks they carve a feudal system.  mom cat   Jan-09-06 07:29 PM   #16 
  - Yeah, sure, like they decided this yesterday.  louis-t   Jan-09-06 05:28 PM   #7 
  - Maybe you can tell me  justabob   Jan-09-06 05:31 PM   #9 
  - the Iranian "PetroEuro" has been referred to as the death knell  UpInArms   Jan-09-06 07:16 PM   #15 
     - yes  justabob   Jan-09-06 07:51 PM   #18 
        - currently, oil is bought with US dollars and any country buying  UpInArms   Jan-09-06 09:18 PM   #20 
  - Interest rates are about to spike  Jacobin   Jan-09-06 05:33 PM   #10 
  - Perfect!  William Bloode   Jan-09-06 05:39 PM   #11 
  - that's what I thought, too, William...  American liberal   Jan-09-06 11:04 PM   #28 
     - I've been reading about what happened to Argentina when  sad_one   Jan-10-06 12:37 AM   #32 
     - This is correct, so far,  EuroObserver   Jan-10-06 03:24 AM   #36 
  - investments  enid602   Jan-09-06 05:54 PM   #12 
  - EEP  HuffleClaw   Jan-09-06 06:09 PM   #13 
  - How will this affect the deficit?  Marie26   Jan-09-06 07:36 PM   #17 
  - interest rates will have to rise to attact investors - it's similar to  UpInArms   Jan-09-06 09:20 PM   #21 
  - Isn't Bush counting on the fact that China won't do anything to  Auntie Bush   Jan-09-06 07:56 PM   #19 
  - *Co is not sophisticated enough to worry, they/it believe that  UpInArms   Jan-09-06 09:22 PM   #22 
  - But the economy is great according to all these economic wizards in the US  leesa   Jan-09-06 10:06 PM   #23 
  - here it comes---what if US can't pay China back what we owe? Does China  wordpix   Jan-09-06 10:26 PM   #24 
  -, from a month ago, put things in "perspective".  HypnoToad   Jan-09-06 10:37 PM   #25 
  - you are annoying me.  hang a left   Jan-10-06 01:56 AM   #34 
  - That won't happen ......  doublethink   Jan-09-06 10:56 PM   #27 
  - We pay them back in dollars  AngryAmish   Jan-10-06 08:44 AM   #39 
  - Recommended...with dismay. Is there anything to be done? n/t  Wordie   Jan-09-06 10:39 PM   #26 
  - Pray.  doublethink   Jan-09-06 11:19 PM   #29 
  - Buy gold coins  AlienGirl   Jan-10-06 01:44 AM   #33 
  - Who wants cheap currency...  lovuian   Jan-09-06 11:27 PM   #30 
  - Everything is made in China - at Wal Mart, Target, Sears, everyplace  kysrsoze   Jan-09-06 11:44 PM   #31 
  - When a Democrat becomes President all hell will break lose  Toots   Jan-10-06 08:06 AM   #37 
  - Umm, virtually every major economist has wanted this to happen for a while  AngryAmish   Jan-10-06 08:53 AM   #40 
     - The US debt is astronomical, government and personal  nolabels   Jan-10-06 09:42 AM   #41 

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