Excerpts from Bloomberg:
Wen Rebuffs Yuan Calls, Is ‘Worried’ About Dollar
March 14 (Bloomberg) -- Chinese Premier Wen Jiabao rebuffed calls for the yuan to appreciate and sought assurances that the U.S. will protect the value of China’s dollar assets.
“I don’t think the yuan is undervalued,” Wen said at a press conference in Beijing marking the end of China’s annual parliamentary meetings. Dollar volatility is a “big” concern and “I’m still worried” about China’s U.S. currency holdings, he said.
Wen urged America to “take concrete steps to reassure investors” about the safety of dollar assets, repeating concerns that he expressed a year ago, sparked by a growing U.S. fiscal deficit. Treasury Department figures show China’s holdings of Treasury securities dropped for a second month in December to $894.8 billion.
Wen’s comments come as lawmakers in the U.S. call for retaliatory trade measures to compel appreciation. On March 11, President Barack Obama urged the nation to move toward a more “market-oriented exchange rate.”
The Chinese premier said that pressure for currency gains can amount to trade “protectionism,” adding that “I’m a strong supporter of free trade.”
He echoed central bank Governor Zhou Xiaochuan in saying that China needs to carefully time any exit from anti-crisis policies, which have included pegging the yuan to the dollar since July 2008.
Sovereign-debt problems and high unemployment around the world could send the global economy into a second, or “double dip” downturn, the premier said. In China, inflation, combined with wide income gaps and official corruption, could lead to social instability “and even affect the government’s hold on power.”
Comments:
There are some surprisingly candid comments from the Chinese Premier.
He is worried, as we are, about unemployment, high levels of sovereign debt, a second leg of the recession (as the ADS indicator hints at) and inflation.
Most importantly are his concerns about social instability and "the government's hold on power".
The last quote is most important to this observer.
This blogger is not aware of Chinese ever being so candid with the media about the potential loss of power in their totalitarian state.
Very significant for the US, is the statistic that Chinese holdings of Treasuries dropped again in December. In my view, this could be a warning to the bond market that we may soon see another sovereign debt crisis as the US may move to monetize more debt if China slows its buying of Treasuries.
Where will China park their wealth if they continue to limit holdings of Treasuries?
In my view, they may be looking at another large gold purchase which would be very bullish for bullion.
Wen Rebuffs Yuan Calls, Is ‘Worried’ About Dollar
March 14 (Bloomberg) -- Chinese Premier Wen Jiabao rebuffed calls for the yuan to appreciate and sought assurances that the U.S. will protect the value of China’s dollar assets.
“I don’t think the yuan is undervalued,” Wen said at a press conference in Beijing marking the end of China’s annual parliamentary meetings. Dollar volatility is a “big” concern and “I’m still worried” about China’s U.S. currency holdings, he said.
Wen urged America to “take concrete steps to reassure investors” about the safety of dollar assets, repeating concerns that he expressed a year ago, sparked by a growing U.S. fiscal deficit. Treasury Department figures show China’s holdings of Treasury securities dropped for a second month in December to $894.8 billion.
Wen’s comments come as lawmakers in the U.S. call for retaliatory trade measures to compel appreciation. On March 11, President Barack Obama urged the nation to move toward a more “market-oriented exchange rate.”
The Chinese premier said that pressure for currency gains can amount to trade “protectionism,” adding that “I’m a strong supporter of free trade.”
He echoed central bank Governor Zhou Xiaochuan in saying that China needs to carefully time any exit from anti-crisis policies, which have included pegging the yuan to the dollar since July 2008.
Sovereign-debt problems and high unemployment around the world could send the global economy into a second, or “double dip” downturn, the premier said. In China, inflation, combined with wide income gaps and official corruption, could lead to social instability “and even affect the government’s hold on power.”
Comments:
There are some surprisingly candid comments from the Chinese Premier.
He is worried, as we are, about unemployment, high levels of sovereign debt, a second leg of the recession (as the ADS indicator hints at) and inflation.
Most importantly are his concerns about social instability and "the government's hold on power".
The last quote is most important to this observer.
This blogger is not aware of Chinese ever being so candid with the media about the potential loss of power in their totalitarian state.
Very significant for the US, is the statistic that Chinese holdings of Treasuries dropped again in December. In my view, this could be a warning to the bond market that we may soon see another sovereign debt crisis as the US may move to monetize more debt if China slows its buying of Treasuries.
Where will China park their wealth if they continue to limit holdings of Treasuries?
In my view, they may be looking at another large gold purchase which would be very bullish for bullion.
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