Discussion » Current Events » Caution urged on dollar assets

  • Ms Bla
    Ms Bla wrote:

    Q:China Daily
    China can reduce its holdings of dollar assets, but should not "overdo" it as the country tries to adjust the structure of its dollar asset-dominated foreign exchange reserves, analysts said.
    The country's foreign exchange reserves amounted to nearly $2.4 trillion by the end of last year - a third of the global total - raising concerns that the massive scale of the holdings could backfire.
    About 70 percent of the reserves are dollar assets, according to various estimates by scholars, and the high proportion means that once the dollar's value slumps, China will incur huge losses.
    But it is equally difficult for China to dump its dollar assets because that could lead to a domino effect on other investors and cause depreciation of China's holdings.
    "China is in a dilemma," said Dong Yuping, economist at the Chinese Academy of Social Sciences.
    According to the latest US Treasury International Capital (TIC) data, China was a net seller of US Treasuries in December, cutting its holdings by $34.2 billion to $755.4 billion.
    China's share of total outstanding short- and long-term US Treasury securities among foreign holders declined to 20.9 percent in December from 23 percent in mid-2009, yielding its position as the largest investor in US treasuries to Japan.
    "The data suggest that China could be more actively diversifying its currency reserves away from US Treasuries," said Jing Ulrich, managing director and chairman of China Equities and Commodities, J.P. Morgan. "We expect the country might be marginally shifting some exposure to other currencies."
    While it is not clear that the selling is part of a consistent strategy, the country should keep a "considerable" proportion of dollar assets in its foreign exchange reserves, said Sun Lijian, economist with the Fudan University.
    "China should not overly reduce its dollar assets, given their high market liquidity," he said. Dollar assets are relatively easy to sell if China needs quick money to safeguard its financial stability, he said.
    More than a decade after the 1997-98 Asian financial crisis, there are increasing suggestions that China use its growing reserves to buy resources, technologies and attract high-caliber professionals from abroad. While they are important, Sun said, China must have enough reserves available for protecting its financial stability.
    Asia was dealt a heavy blow during the financial crisis when international speculators attacked the currencies of some economies which did not have adequate reserves, plunging them into a spiral of currency depreciation, economic contraction and social chaos.
    Since then, Asian countries have paid great attention to increasing foreign exchange reserves; and now, they account for seven of the top 10 nations.
    As China's reserves grow, however, concerns are also growing that they could invite speculative capital inflows, especially when the country's economic recovery is quicker than in other regions.
    Once the capital flows out of the country, there will be shocks to the domestic market and the economy, Sun warned.
    To address the problem, China must quicken its pace of balancing domestic demand and exports as it strives to stimulate consumption as a major engine of economic growth, said Dong.
  • Ms Bla
    Ms Bla wrote:
    better buy some gold ......huhu
  • Kodi
    Kodi wrote:
    Either buy, mine, or steal some gold or here is an idea, "Inspire some homegrown innovation in order to build value in China from within!"
  • Da Fan
    Da Fan wrote:

    yeah, that's right. of coz it's a great idea to purchase raw material, gold, technology or foreign companies stocks, but, there are too much burdens to do so. the fluctuation of gold and raw material price is much bigger than that of dollar, and we cannot buy any technologies that we want, and, tho equity investment is nothing bad, but we cannot easily become the majority shareholders, so as to control the BOD. the problem is not we sell too many stuffs, the problem is we produce to many low value added good. and as long as the local labor cost is still low, and the young generation's buying power is still heavily constraint by real estate concern, how can we raise the domestic consume, how can we…(the logical line goes on and on…)

  • Joakim Berg Solum
    The only real currency is bullets and canned food and water.
  • Ms Bla
    Ms Bla wrote:
    yes ....and too many companies every year seems like increase4%~ 20% amplitude uniformity but actullay our salaries down all the while...becuz inflation erodes our purchasing power less and less...
    what should we do?? scream out with you big boss , tell her/he you wanna quit???
  • MiLo
    MiLo wrote:
    stimulate consumption???it's funny!!!
    In China, the rich went abroad to buy the luxury rubbish, meanwhile, the poor must save everything they can to buy a house! so, when will consumption happen in China?
  • Da Fan
    Da Fan wrote:

    so i said that, the key is to raise labor price, and break the real estate monoply chain. it will: 1)force the economy switch to more value added form, and 2)larger domestic demands

  • MiLo
    MiLo wrote:
    Labor price increment was already happened in GZ, but, its not enough.
    Break the real estate monoply chain? we can do it in our dreams...
  • Da Fan
    Da Fan wrote:

    haha, be positive, man;)

  • Ms Bla
    Ms Bla wrote:
    Govt wants a better view of 'naked officials' -http://www.chinadaily.com.cn/china/2010-02/24/content_9492278.htm
    and Ch-Gvt intends to our country will incepting 100K students abroad from USA in near future......... =.=
  • 哎呀
    哎呀 wrote:
    “什么亚克西,什么亚克西,党中央的政策是亚克西。” 亚克西!
  • Ms Bla
    Ms Bla wrote:
    Maria: okay okay yakexi yakexi @@@@ haha means good good and very well ............lol
  • Mohammed Abdi
    Mohammed Abdi wrote:
    historically, gold's performance is mediocre at best...
    the problem is you dont have too much of a choice

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