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The Forum > Article Comments > China tries to wriggle out of the US dollar trap > Comments

China tries to wriggle out of the US dollar trap : Comments

By Wenran Jiang, published 18/5/2009

By diversifying into resources and using financial instruments, China attempts to reduce its US dollar exposure.

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Good on them.
The sooner as the US dollar is dethroned the better.
Maybe some meaningful dialog with Iran can begin then.
I wonder what the US would say if China begin buying and selling oil in RMB and Euros? I predict an "emergency" of some sort. Taiwan?
Posted by Ozandy, Monday, 18 May 2009 9:25:12 AM
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@Ozandy
Tiawan!
Given the last ten years such a suicidal course of action by the seppos is all too imaginable. Be the easiest way to default on their debts too. Dont have to repay someone your at war with do you. Poor China will find that the white mans contract is not to be trusted and once again perfidious albion has swindled a lowly coloured people with fraud, lies and double dealing.
Remind me again why our system is better then theirs?
Posted by mikk, Monday, 18 May 2009 10:15:31 AM
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Good article. Describes how the balance of economic power is gradually moving East, which is entirely appropriate.

Although I'm not sure the title should indicate any "wriggling", which carries with it a pejorative connotation that the Chinese are attempting something slightly underhand. It seems to me a patently sensible course of action, to insulate your country from the failures of others, as much as one can when you are as reliant as anyone on the benefits from world trade.

Ozandy and mikk introduce Taiwan into the discussion, which is an interesting angle.

I'm not sure myself whether for much longer Taiwan will be the political tennis ball it has been in the past. Relations between Beijing and Taipei are gradually thawing, thanks - as much as anything - to the increased economic clout wielded by the mainland.

The part that is often missed by foreign observers is that underneath it all, the Chinese on both sides of the Taiwan Strait are in fact... Chinese.

I confess that when I first visited Taipei in the mid-nineties, the lack of animosity at street level toward the mainland surprised me considerably, but once the initial feeling of confusion passed, it was quite obvious that the average civilian punter there regards the split as temporary. Especially amongst the younger population.

I suspect that the ability of the US to use Taiwan as a goad or as a threat to the mainland, is diminishing rapidly.

But while I'm here - what's this all about mikk?

>>once again perfidious albion has swindled a lowly coloured people<<

The last time England had any influence in China was many, many years ago.
Posted by Pericles, Monday, 18 May 2009 12:12:05 PM
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*Poor China will find that the white mans contract is not to be trusted and once again perfidious albion has swindled a lowly coloured people with fraud, lies and double dealing. *

Hehe Mikk, its seems that you have little experience of trading
with SE Asia. I can assure you that many a naive Australian
has been done like a dinner, when they insisted on their
"contract" actually mattering. Think again!

If we look at wool contracts, iron ore contracts, fertiliser
contracts, they seem to only matter if the market is moving
in favour of the non Australian.

The whole Asian mindset to trade is different to ours, as one
very smart Asian lady pointed out to me. Fair game means
exactly that!
Posted by Yabby, Monday, 18 May 2009 12:42:29 PM
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Wenran Jiang

Your comment requires balance to determine the net effect of China's US$2 trillion reserves and needs to be offset with the growing liabilities.

May I suggest that you look very closely at the extent of China's rapidly growing debt?

The massive Q1 bank-lending boost as part of the stimulus package has produced indications of blatant misuse and increasing risk levels in Bank NPLs.

Compare the massive level of local government debt, (US$672.8B end Q3 2008). Local government debt does not reflect the true extent of the liability, especially that debt raised through their local investment corporations. Add to that the mandatory US$383B local government contribution of the US$585B stimulus package.

Also examine AVIC's debt network and airline refinancing activities.

China 3 major airlines are technically insolvent and have been the beneficiaries of recent billion dollar bailouts. They also face the cost of 867 new aircraft to be delivered over the next 5 years at the rate of around 3 aircraft per week. While the airlines are seeking cancellations and deferments, these do not come cheap.

Unemployment is not restricted to the export manufacturing industries.

Massive restructuring to reduce costs in coal mining, iron, steel, shipbuilding and power generation has also produced increasing widespread unemployment in key provinces and municipalities.

Add to that the huge force of guest workers returning from countries around the world as the work dries up.

As far as GDP growth is concern, you may also wish to take into account the serious discrepancies between China's calculations and that of the developed nations.

When you have completed your journey down this trail, China's anxiety to achieve its currency-balancing act suddenly appears in a new light.

Arthur Thomas
Posted by Arthur T, Monday, 18 May 2009 12:44:44 PM
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The sooner that a global currency evolves the better. Global trade needs a global currency that is ethically managed by experts in the world's best sustainable long terms interests.

China can be help create a new world currency order by pushing for its introduction and by investing heavily in the IMF and World Bank programs.

But will ethical and impartial behaviour from an international money regulator be a sticking point for a nation such as China that has in the past 2 decades done some of the most vile deals with leaders indicted for crimes against humanity? eg. Oil for weapons in Sudan.

China needs to dramatically lift its international profile on human rights and the rule of law if it is to be taken as a serious player in international affairs with the goal of shaping world institutions.
Posted by Quick response, Monday, 18 May 2009 2:36:36 PM
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