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China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings

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Poboy Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 01:15 PM
Original message
China Proposes To Cut Two Thirds Of Its $3 Trillion In USD Holdings
Edited on Sun Apr-24-11 06:22 PM by Poboy
From Xinhua:

China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March. Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

-----
China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.
The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.
---

http://www.zerohedge.com/article/china-proposes-cut-two...
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leveymg Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 01:34 PM
Response to Original message
1. And, how exactly are they going to dispose of those $2 trillion in USD assets?
Edited on Sun Apr-24-11 01:49 PM by leveymg
And what might the effect on the US currency and economy be of a dumping on world markets that much US debt and holdings?
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Incitatus Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 06:36 PM
Response to Reply #1
4. I'm no economist, but it looks like it could be very bad.
Maybe this is just a threat. China isn't happy about US involvement in Libya, is it?
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MadHound Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 06:38 PM
Response to Reply #1
6. By selling Treasury bonds, and dumping currency.
And we will see our inflation rate rise at a dramatic rate, and our dollar weaken.

This is not good.
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indepat Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Apr-25-11 10:38 AM
Response to Reply #6
9. No one could have ever guessed this: looks like the trillions expended in the war on terra
might not be keeping us safe. :patriot:
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The Doctor. Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 01:38 PM
Response to Original message
2. Weeeeeeee!
This ought to be interesting.
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Poboy Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 06:23 PM
Response to Original message
3. Edited.
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LiberalFighter Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 06:38 PM
Response to Original message
5. Force them to keep those holdings.
Don't they know they are worth less now?
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stockholmer Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 06:54 PM
Response to Original message
7. K&R dollar is already dropping on the Forex
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jpak Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 06:55 PM
Response to Original message
8. Maybe they will open some factories here in the US
n/t
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Poboy Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Apr-25-11 12:59 PM
Response to Original message
10. once more up the flagpole.
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amandabeech Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Apr-25-11 06:13 PM
Response to Original message
11. If they let their currency float instead of pegging it to the dollar,
they'd solve a lot of their problems.

I'd advise them to quit whining.

Nonetheless, it isn't good for us. I wonder if the Fed will be the buyer of last resort.
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