Central bank governor Zhou Xiaochuan said in an interview published Tuesday that China would stop stockpiling foreign exchange reserves. "Many people say that foreign exchange reserves in China are (already) large enough,'' Zhou told the Emerging Markets magazine. We do not intend to go further and accumulate reserves," he said.
This leaves open an obvious question - if Mr. Zhou and his nice central bank won't finance the US current account deficit by accumulating US dollars, then who will? If he stops buying dollars, then demand will fall and so will the price of the dollar relative to the yuan. Chinese goods will become more expensive, US consumers will stop shopping at Walmart and the Chinese economic miracle will suddenly become the Chinese economic nightmare.
He can't be serious, can he?
Hey! You've won a ride back to the top
3 comments:
Anonymous said...
Forget that post about mortgage resets, "this is the end, my friends."
Today is the day the world as we knew it ended. China is finally pulling the life support system fron the US economy.
Unknown said...
If he said it, then he's definitely telling a lie.
The Landlord said...
bear in mind that the yuan is not a freely traded currency. It's at a set exchange with the dollar to prevent exactly what you were descrbing (chinese goods getting too expensive).
Unless there's been a change in policy that I'm unaware of?
P.S. Most other countries are furious at China's reluctance to allow free trade of their currency. China defends itself by saying that to open trade on it's currency would crush it's economy.