Posts by "qingyu"

thank you , daveo!

black mail to china?

cat, dont worry about china ageing. the fact in china is too many workers but too few jobs.

also, i dont think muslim people can bear hard work like chinese. naturally, low latitude weather make people hard to concentrate.

in iraq and africa, chinese manufactory owners are used to hire chinese people.

Why China hates loving the dollar
By Martin Wolf
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The current international currency system is the product of the past. Thus did Hu Jintao, Chinas president, raise doubts about the role of the US dollar in the global monetary system on the eve of last weeks state visit to Washington. Moreover, he added, the monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the US dollar should be kept at a reasonable and stable level. He is right on both points.

In criticising US fiscal and monetary policies and, in particular, the Federal Reserves policy of quantitative easing, Mr Hu was following a well-trodden path. In the 1960s, Valry Giscard dEstaing, then French finance minister, complained about the dollars exorbitant privilege. John Connally, US Treasury secretary under Richard Nixon, answered when he described the dollar as our currency, but your problem. The French and now the Chinese desire exchange rate stability but detest the inevitable result: an open-ended commitment to buying as many dollars as the US creates. Both want to discipline US policies. Both have failed. Are things likely to be different this time? No.

The Chinese and other heavy interveners have a peculiar way of showing their distrust of the dollar. Between January 1999, just after the Asian financial crisis, and October 2010, the global stock of foreign currency reserves increased by the staggering total of $7,450bn. China alone added $2,616bn. During the recent financial crisis, global reserves did provide a cushion to holders, falling by just $473bn from July 2008 to February 2009 (6 per cent of the initial stock). But then purchases restarted: between February 2009 and October 2010, reserves rose by another $2,004bn.

The dollar is not the only reserve currency. But it remains the most important. In the third quarter of 2010, the allocation of only 56 per cent of global reserves was known. Of that, 61 per cent was in dollars and 27 per cent in euros. China does not reveal the composition of its reserves. But it must be heavily invested in dollars, too.

Why have relatively poor countries made these huge investments in the low-yielding liabilities of the worlds richest countries and, above all, of the US? Why has China, in particular, purchased vast quantities of debt from a country whose policies it distrusts more than $2,000 for every Chinese and some 50 per cent of gross domestic product?



The answer is that this is the by-product of efforts to keep the currency down and exports competitive. It is no longer, if it ever was, the product of an effort to purchase insurance: the risks to Chinese wealth created by its huge reserves are surely greater than any insurance benefits. That is probably now true of other heavy interveners.

Is there a plausible reform of the international monetary system that would solve the Chinese dilemma? If, for example, the world were to go on to the classic gold standard, as some recommend, the US would be experiencing a gold outflow and would be forced to adjust via deflation. China might prefer that, although it would not be good for its exports. But to state this outcome is to indicate why it has next to no chance of happening. Since the first world war no important country has tolerated that method of external adjustment. The US is not Estonia.

Some, including Chinese officials, talk of a shift towards SDRs (special drawing rights) as a reserve asset. But the SDR is merely a basket of major currencies. Any reserve holder can grasp that basket today. The SDR is not a currency and cannot replace the currencies of which it is made. For the conceivable future the global currency regime will depend on national fiat (man-made) currencies. SDR issuance may be a supplement; it will not be a replacement. The Chinese do not seem to disagree.

What about turning the renminbi itself into a global reserve currency? In the very long run, this must happen. But any swift move in that direction would raise two difficulties for China. First, it would only make sense if the currency were to be unpegged from the dollar, in which case the mercantilist strategy would collapse. Second, for a currency to become global it must be freely convertible and traded in deep and liquid financial markets. China would have to abandon exchange controls and liberalise its financial system. It would become impossible to force Chinese people to hold vast quantities of low-yielding bank deposits. Above all, the authorities would lose their most important source of economic control: the banking system. This

i guess not, because he long crude from 85.8