I Get By With Alittle Help From My Friends....

Dinar Outcast

You are not connected. Please login or register

China official media:U.S. woes threaten global recovery

Go down  Message [Page 1 of 1]



China official media:U.S. woes threaten global recovery

Reuters US Online Report Business News

Aug 07, 2011 20:29 EDT

BEIJING (Reuters) - The United States and Europe must summon the political courage to overcome their debt crises or global economic recovery will be threatened, Chinese official media said on Monday, warning Washington against letting the dollar weaken.

A commentary in the People's Daily newspaper, the chief mouthpiece of China's ruling Communist Party, said the troubles facing the United States and European Union grew out of the political dysfunctions of the Western democracies.

"It must be understood that if the U.S., Europe and other advanced economies fail to shoulder their responsibility and continue their incessant messing around over selfish interests, this will seriously impede stable development of the global economy," the paper said.

"People have deepening misgivings about the political decisiveness of the Western nations, and this has also seriously hurt global investors' confidence in world economic recovery, exacerbating market turmoil," it said.

Beijing officials have so far been publicly mute about the blow to Washington after Standard and Poor's stripped the United States of its top-tier AAA credit rating on Friday. But state-run media have decried the potential damage to China's growth and huge holdings of U.S. treasury assets.

Such media comments do not amount to a definitive response from China's top leaders, who make tread a more careful public line. But they lay bare the economic and political pressures weighing on policy-makers deciding how to handle China's huge holdings of dollar-denominated assets.


The official Xinhua news agency warned Washington against seeking to boost exports and growth by letting the dollar weaken, a move that would lower the value of Beijing's vast holdings of U.S. dollar assets.

Owner of the world's largest foreign exchange reserves at $3.2 trillion, China is also the biggest foreign buyer of the U.S. Treasuries. Analysts estimate about 70 percent of its reserves are invested in dollar assets, including Treasuries, although the exact investment mix has not been disclosed.

"From this point, the U.S. has every motive to maintain a weak dollar," said an English-language commentary from Xinhua.

"Before the U.S. makes any move, please remind it: don't forget your responsibility as the issuer of reserve currency to maintain the stable value of the dollar."

A weaker dollar could impede global economic recovery by stoking turmoil in financial markets and lifting the prices of dollar-denominated commodities.

The People's Daily commentary said the recent turmoil was driven by Washington politics, not economic fundamentals.

"What has been pushed to the edge of the precipice is not the global economy, but Washington politics," said the commentator, writing under a pen name "Zhong Sheng," which means the "voice of China." That pen name of sometimes used for commentaries reflecting higher level opinion.

"Only if the Western nations stop wantonly shirking responsibility and take out a sharp blade of determination and courage to cut through their fetters, strengthening policy coordination with developing countries, then the global economy has hopes of taking a path of stable recovery."

On Monday, the Australian Treasurer Wayne Swan criticized China over its media critisism of U.S. "debt addiction," calling Beijing's comments unhelpful.

The Chinese Foreign Ministry, central bank and other government agencies have made no public comment on the U.S. debt downgrade and have not answered faxed questions. Top officials are likely to remain cautious about making any remarks that could undermine the value of China's dollar-held assets.

(Reporting by Chris Buckley; Editing by Ron Popeski)

Source: Reuters US Online Report Business News


China sounds a dollar warning bell
Robert Gottliebsen

Published 8:09 AM, 8 Aug 2011 Last update 10:25 AM, 8 Aug 2011


It is impossible to overstate the importance of the US ratings downgrade. America’s main banker, China, is signalling to the world that, longer term, they are going to take action to replace the US dollar as the world’s trading currency – an action that will transform global trading and will not be pleasant for the US.

To underline this intention, the Chinese played a pivotal role in the US ratings humiliation.

The Western press highlights the action by Standard & Poor's at the weekend. But on the previous Tuesday (August 2) the Chinese government-owned ratings agency Dagong downgraded US debt to third grade status (or A) and clearly indicated that a further downgrading to BBB was almost certain. The Chinese downgraded the US debt from first to second grade status last year.

When the US ratings agency Standard & Poor's saw what the Chinese had done they decided that they would also downgrade the US, but the US ratings agency was simply following America’s banker.

Remember it is the Chinese (and to a lesser extent the Japanese) who fund the enormous US expenditures on defence and pork barrelling. Through Dagong, the Chinese are demanding that the US cut its spending by $US4 trillion over five years, not the $US2 trillion that the US Congress has approved.

Dagong expressed the warning bluntly: “This incident (the Democratic/Republican wrangle, which led to the compromise) will definitely exert its continuous impact on investors’ confidence in US Treasury bonds, affecting the stability of the US debt income” (my emphasis).

Like all bankers, the Chinese have the latent power to force the US to buckle by stopping new American lending and selling down their $US3 trillion exposure. But the Americans know that such an action by China would bring on a global crisis and the Chinese would suffer most – particularly as they loan to the US in American dollars.

It’s not likely that the Chinese will take major action in the short-term but they see that it is now clearly time to start to make the renminbi or a basket of currencies the world’s main trading vehicle. The process will begin in the Asian region and there will be great pressure put on Australia to convert its mineral exports from American dollars to either the renminbi or a currency basket.

Of course this will cause the Chinese currency to rise which creates its own set of problems for China.

Chinese economist Sun Lijian, writing in the Communist Party mouthpiece, the People's Daily, says the ratings cut had "sounded the alarm bell for the dollar-denominated global monetary system."

The Sun Lijian comments follow a stinging attack launched on Saturday by the official Xinhua news agency, which said Beijing had "every right" to demand Washington safeguard Chinese dollar assets.

Xinhua said Washington needed to “come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.”

"To cure its addiction to debts, the United States has to re-establish the commonsense principle that one should live within its means," Xinhua said (US downgrade 'sounds alarm bell': China, August 7).

At the moment, the Chinese are enjoying lecturing the Americans in the way that the Americans love to lecture the Chinese. But that’s just the start.



Dollar to Be 'Discarded' by World: China Rating Agency

The man who leads one of China’s top rating agencies says the greenback’s status as the world’s reserve currency is set to wane as the world’s most powerful policy makers convene to examine the implication of S&P’s decision to strip the United States of its triple “A” rating.

The United States "should get a clear understanding that the continuous decline of the debt service capability will inevitably result in the outbreak of a sovereign debt crisis.”

Guan Jianzhong
Chairman, Dagong Global Credit Rating
In comments emailed to CNBC, Guan Jianzhong, chairman of Dagong Global Credit Rating, said the currency is “gradually discarded by the world,” and the “process will be irreversible



Sponsored content

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum