China's currency reserves are estimated at $2.45 trillion dollars. While hard data is a state secret, some information was obtained from the China Security Journal and reported by Reuters.
Roughly 65% of China's currency reserves are in U.S. dollars, 26% in euros, 5% in pounds and 3% in yen. With such a huge sum outstanding, Chinese officials are afraid of depreciation. Hu Xiaolian, vice governor of the Peoples Bank of China, writing in China Finance said: "Once a currency's value becomes unstable, there will be quite large depreciation risks for assets."
You are probably wondering what China is buying lately. Here are a couple to transactions:
- China bought 1.7 trillion yen, surpassing the record of 255.7 billion in 2005.
- They increased their holdings of South Korean bonds to 2.48 trillion won from 1.87 trillion at the end of 2009.
- China cut back on U.S. treasuries from 894.8 billion to $843.7 billion in June.
- China may buy more U.S. treasuries in September and maybe more South Korean bonds.
This is a clear warning to the United States: Keep the U.S. dollar stable.
While this may be difficult to prove, the numbers are real. Whenever there is bad news, the dollar is slammed which, in turn pumps up commodities and the stock market, giving the impression that all is well.
China is warning against this kind of game playing and wants the dollar held steady. The world is on a tightrope and the slightest hint of dollar depreciation would turn things upside down in a hurry.
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Reader Comments (Page 1 of 1)
9-04-2010 @ 11:22AM
thedude said...
This is laughable. China lecturing the US to not play games with our currency.
We should declare all US treasuries and currency held in China as defunct. Repatriate all US properties owned by Chinese nationals , encourage all countries to do the same. Remove all US manufacturing from China and send the communists into a financial tailspin they will never recover from.
With any luck this will result in civil war which is exactly what China needs. The subservient 1+ billion of China need to rise up and fight for their civil rights.
As long as the US and Europe continue to fuel economic growth for the elite of China the remaining "underclass" will continue to suffer, as a matter of fact as greed becomes ever more prevalent there will only be an increasing loss of freedom until the majority of Chinese are reduced to nothing more than slave labor. Even worse than what they suffer today.
It is time for the US and Europe to wage economic ad industrial war against China.
9-04-2010 @ 7:17PM
Plainer said...
I misread the headline thinking China was backtracking on their promise to appreciate the Yuan. Simplistically, it's China's problem, not ours, if the Dollar isn't stable under our current economic situation. Sarcastically, they should also diversify their $ holdings into Canadian $, Australian $, N. Korean won, Russian Rubles, or Venezuelan Bolivars and even Iran's Rials. I'm sure these countries would welcome taking their so-called worthless U.S. $'s. Time for China to wake-up to global economic reality.
9-04-2010 @ 11:17PM
Michael Sanders said...
China is right to warn US... Fooling with the stablity of world currencies is NOT the way to pump up the stock market. It's a short-term strategy, which can potentially effect millions of people, around the world. Although, I am fully invested in the US stock market, what good is money if you have a guilty conscience? Right now, stability should be our #1 priority. Someday, we might be fortunate enough to visit other lands... I don't want to see poverty and desperation, when I do. I'll admit, it's ironic for a communist country to lecture US on capitalism, but what they're saying is true. The key to guilt-free investing is to buy stock in companies which are making the world a better place. Clean energy, safer vehicles, open lines of communication, better food and waste management are just some of the things which are going on. When you invest, you are affecting the globe. Someday, we will all stand before the Lord our God. I for one, am trying to clean up my act, my neighborhood and leave this "campground" a better and safer place, than when I arrived, 52 years ago. Do I fear the Lord? You betcha!
9-05-2010 @ 9:20AM
Patrick said...
I am amazed at how ignorant some people are. "It is right for Chine to warn us"" to "I don't want to see poverty and desperation". Maybe while visiting in China you can visit and pray with those in prison for being a Christian and owning a Bible. Then maybe you can visit the abortion clinic where they perform government mandated abortions. Maybe you will visit a third world democracy fighting the Communists for survival that USED to make outsourced goods for Americans when making them in the US of A became too expensive and China took that away SO AMERICAN BUSINESSES COULD MAKE MORE MONEY!!!Give me a break. I am sure you invest in American companies that have turned thier backs on America and American workers to make a buck. ALL oil companies do it. Look at the filth oil workers in Nigeria live in so you can drive to church. Get out of the stock market. Make youself feel better. Do the Christian thing and give your money to the exceptionally wealthy Pat Robertson to aid those in Africa so he doesn't need to spend his 200 some million.
I agree with the first comment. China has tied the yaun to the American dollar for so long ONLY to keep their products cheap and attractive to the American buyer. Walmart imports close to 40% of China's GNP. Walmart also blackmails American companies to move production to China if they want to keep contracts with Walmart. If China wants to get away from the weak dollar, just let the yaun float like ALL other international (and free world) currencies.
I say add a tarrif on anything made in China (even the kids they sell cheaply in America because adopting American kids is expensive) until China floats their currency AND improves human rights. Force China to grow up and become part of the real world.
9-05-2010 @ 2:09PM
Jolly Roger said...
Hey...you dance with the devil he gets to bring you home! Pay backs a bitch huh?
9-05-2010 @ 8:52PM
Michael Sanders said...
I see that I must be somewhat naive... You are correct, Jesus said that there will always be the poor, and that wars will come and go, until the end! How could I have been so deceived, as to believe that we can make a difference in this world? Oh, woe is me?
9-05-2010 @ 11:52PM
Toy said...
America needs to return to In God We Trust and live by it. He ( God) said If my people will repent , pray and turn from their wicked ways I ( God ) will heal their land. This is our only hope,Repent and Pray, Pray, Pray.