[Marxism] China values dollar holdings

Greg McDonald sabocat59 at mac.com
Sun Aug 12 05:49:52 MDT 2007


International Herald Tribune
Xinhua: China's central bank says U.S. dollars are important part of  
reserves

The Associated Press
Sunday, August 12, 2007

BEIJING: China sought Sunday to dampen speculation it will conduct a  
massive sell-off of U.S. dollar holdings, with a central bank  
official saying the dollar remains a mainstay of its foreign exchange  
reserves.

In an interview carried by the government's Xinhua News Agency, an  
unnamed official with the People's Bank of China said U.S. dollars  
and government bonds are "an important part of China's foreign  
reserve investments."

China's US$1.3 trillion in foreign exchange reserves are the largest  
in the world and are believed to be comprised largely of dollar  
assets, potentially giving Beijing enormous sway over the dollar's  
value and currency markets worldwide.

A report in the British newspaper The Daily Telegraph this past week  
that quoted Chinese government economists as saying China would dump  
its dollar holdings in the event of a trade war with Washington added  
to jitters in stock markets already unnerved by volatility in U.S.  
share markets.

Xinhua said the central banker's remarks were intended to counter  
unspecified reports in Western media that China "is threatening to  
carry out a sell-off of U.S. dollars." The Xinhua report was  
prominently posted on the central government's main Web site, in a  
further sign Beijing hoped the statement would underscore its  
commitment to hold U.S. dollar assets and calm investors.

"China is a responsible investor in international financial markets,  
and our country's foreign exchange reserves are managed with the  
operational goals of safety, liquidity and profit," Xinhua quoted the  
central bank official as saying.

"The U.S. dollar occupies an important position in the international  
monetary system," the official was quoted as saying. "The U.S.  
financial markets have high volume and great liquidity. U.S. dollar  
assets, including U.S. government bonds, are an important part of  
China's foreign reserve investments."

The People's Bank does not disclose the composition of the foreign  
exchange reserves, which have swelled in recent years as China's  
exports surged and investors poured money into the country to profit  
from an economy now in its fourth straight year of double-digit growth.

But the reserves have become a political issue both within China and  
between Beijing and Washington. As the dollar has fallen in value,  
the People's Bank has come under pressure to diversify its holdings  
to maintain the value of the reserves and improve returns.

Washington has pointed to China's growing reserves as proof that the  
Chinese currency is undervalued, making Chinese exports cheap,  
putting American manufacturers at a disadvantage and compounding a  
hefty U.S. trade deficit. Several U.S. senators have renewed calls in  
recent weeks to punish Beijing if it does not let the currency, the  
yuan, rise in value.

In the Xinhua report, the Chinese central banker defended U.S.-China  
economic and trade relations as underpinning the "stable development"  
of the global economy.

"We attach great importance to actively promoting the harmonious  
development of China-U.S. economic and trade exchanges," the official  
said.





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