Archive for the Currency wars Category

Commentary: U.S. fiscal failure warrants a de-Americanized world [Xinhua / Sweet & Sour Socialism Essential Archives]

Posted in Bourgeois parliamentary democracy, Currency wars, Early 21st Century global capitalist financial crisis' US origins, Economic crisis & decline, Guantanamo Bay concentration camp, Iraq, National Security Agency / NSA, Neo-colonialism, NSA, Pentagon, Sweet and Sour Socialism Essential Archives, Torture, US "War on Terror", US drone strikes, US foreign occupation, US imperialism, USA, USA 21st Century Cold War, Wall Street, War crimes on December 16, 2013 by Zuo Shou / 左手

By Xinhua writer Liu Chang

BEIJING, Oct. 13 (Xinhua) — As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.

Emerging from the bloodshed of the Second World War as the world’s most powerful nation, the United States has since then been trying to build a global empire by imposing a postwar world order, fueling recovery [sic] in Europe, and encouraging regime-change in nations that it deems hardly Washington-friendly.

With its seemingly unrivaled economic and military might, the United States has declared that it has vital national interests to protect in nearly every corner of the globe, and been habituated to meddling in the business of other countries and regions far away from its shores.

Meanwhile, the U.S. government has gone to all lengths to appear before the world as the one that claims the moral high ground, yet covertly doing things that are as audacious as torturing prisoners of war [sic], slaying civilians in drone attacks, and spying on world leaders.

Under what is known as the Pax-Americana, we fail to see a world where the United States is helping to defuse violence and conflicts, reduce poor and displaced population, and bring about real, lasting peace.

Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.

As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites, while bombings and killings have become virtually daily routines in Iraq years after Washington claimed it has liberated its people from tyrannical rule.

Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized.

Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.

To that end, several corner stones should be laid to underpin a de-Americanized world.

For starters, all nations need to hew to the basic principles of the international law, including respect for sovereignty, and keeping hands off domestic affairs of others.

Furthermore, the authority of the United Nations in handling global hotspot issues has to be recognized. That means no one has the right to wage any form of military action against others without a UN mandate…

…What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.

Of course, the purpose of promoting these changes is not to completely toss the United States aside, which is also impossible. Rather, it is to encourage Washington to play a much more constructive role in addressing global affairs…

Edited by Zuo Shou

Full article link: http://news.xinhuanet.com/english/indepth/2013-10/13/c_132794246.htm

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Renminbi’s global use growing [People’s Daily]

Posted in China, Currency wars, Economy, Germany, Hong Kong, IMF - International Monetary Fund, Japan, Singapore, U.K., USA on May 27, 2012 by Zuo Shou / 左手

by Xiao Gang (China Daily)

April 21, 2012

Internationalization of China’s currency is inevitable and it should prepare for the systematic financial risks that will arise

Just a few years ago, it would have been difficult to imagine that the global use of the renminbi would spread so fast. However, today we can see the situation has changed greatly.

In 2011, China and its trade partners conducted cross-border renminbi trade settlements valued at 2.58 trillion yuan ($410 billion), more than 4 times the 2010 total, and covering nearly 10 percent of the China’s total trade.

Meanwhile, renminbi-denominated overseas and foreign direct investment – a pilot program which began in 2011 – reached 110 billion yuan. So far, China’s central bank has signed bilateral currency swap agreements valued at 1.6 trillion yuan with 16 of its counterparts around the world.

Although status as a major global reserve currency is closely associated with full capital account convertibility, a flexible currency regime, deep and liquid capital markets and a willingness to let other countries accumulate the currency, through running trade deficits, it should be remembered that the renminbi still has many opportunities to internationalize further before these conditions are met. In fact, the currency’s ascendancy and progress toward these conditions can occur simultaneously.

Historically, the internationalization of a sovereign currency is determined by the size of its economy and trade. The United States’ economy surpassed the United Kingdom’s around the time of the World War I, and the latter lost its status as the world’s largest exporter in the 1920s. Finally, the US dollar displaced Sterling as the major global reserve currency around World War II.

As the world’s second largest economy, the largest exporter and the second largest importer, China has become increasingly integrated into the world economy, and this has been one of the main driving forces toward the renminbi’s global usage. Moreover, China is one of the largest destinations for foreign direct investment, $1.22 trillion from 1978 to 2011.

A fully convertible currency does not equal an international reserve currency. Nowadays, around 100 countries maintain fully convertible currencies, but only a few are used as global reserves. That is to say, the internationalization of a currency can proceed before its capital account is liberalized. It was under such conditions of inconvertibility that the German and Japanese currencies internationalized. A current account surplus should not be a barrier to the path of forging an international currency.

The UK, the US, Germany and Japan all internationalized their currencies whilst running trade surpluses. The most important channel for currency outflow was overseas capital investment, in particular, letting credit follow trade outside the countries and have a capital account deficit.

Despite its overall long-term net trade surplus, China runs bilateral deficits with many Asian countries, therefore, there is large potential for wider use of the renminbi. On the other hand, as more and more Chinese enterprises go abroad, China has accelerated its overseas direct investment, totaling $437.3 billion in 178 countries and regions by the end of 2011. The International Monetary Fund forecasts that China’s yearly ODI will exceed $280 billion by 2016.

That is a comprehensive way for China to internationalize the renminbi: combining trade settlement, overseas investment and foreign aid.

If the renminbi wants to become a global reserve currency, China’s financial markets would need to open further to foreign investors, which would require the removal of restrictions on cross-border capital flows. However, China can make full use of the Hong Kong Special Administrative Region, an international financial center, as a springboard to internationalize its currency while taking gradual steps to reform mainland markets.

Hong Kong’s offshore renminbi market has already played and will continue to play an essential role in cross-border renminbi investments and other financial products and services. At present, renminbi deposits amount to 10 percent of total banking deposits in Hong Kong, and the renminbi has become the third largest currency held after the HK dollar and US dollar.

Interestingly, the UK signed a deal with Hong Kong aimed at turning the City of London into an offshore trading center for the renminbi. Singapore has also showed strong interest in this regard. Whether trade in the offshore renminbi has boomed or not, many international banks, such as Deutsche Bank, CitiBank and HSBC already have renminbi traders sitting on [sic] their dealing rooms in London.

Fundamentally, status as a global currency must be driven by market forces. The cross-border renminbi business provides enterprises and financial institutions with the right to freely choose settlement and investment currency, so it helps them get rid of the dependence on only one or two currencies, mitigating the exchange rate risks, saving costs and increasing efficiencies. It is estimated that renminbi settlement reduces the transaction cost by about 2 percentage points in contrast to settlement in US dollar.

More importantly, there will be a new choice for enterprises to raise funds from different onshore and offshore renminbi markets, lowering the cost of financing and conversion.

In January, a survey on 200 overseas customers conducted by the Bank of China found that 67 percent of respondents have used or plan to use the renminbi in their business operations, indicating the huge demand of cross-border renminbi markets.

In practical terms, remninbi-denominated assets are becoming attractive products for investors. Japan and the Republic of Korea announced their plans to buy Chinese government bonds. China has been asked to extend renminbi-denominated loans to BRICS group and other countries. That could be a further step to expand the use of the renminbi in international transactions, and would be effective way of gradual internationalization of the renminbi.

It will encourage non-residents to hold renminbi when the currency has potential for appreciation. After years of unilateral appreciation, the renminbi exchange rate is now close to equilibrium, making the currency more likely to experience a two-way fluctuation. But that does not necessarily mean an end to renminbi appreciation. Apparently, it is significant to intensify the currency regime reform and maintain its relative stability at the reasonable level.

Every silver lining has its cloud [sic]. With the renminbi’s internationalization, China should be well prepared to address new challenges; the systemic financial risks that can be generated hand-in-hand with free cross-border capital flows and financial reforms.

While the renminbi’s internationalization has a long way to go, it is inevitable, and will be sooner rather than later. It may not displace the US dollar, but can add a new alternative to the multilateral international monetary system.

Article link: http://english.people.com.cn/90778/7794541.html

“Time for China to dump U.S. debt?” – China caught in ‘dollar trap’ [Xinhua]

Posted in China, China-US relations, Currency wars, Early 21st Century global capitalist financial crisis' US origins, Economic crisis & decline, Germany, Japan, USA on November 3, 2011 by Zuo Shou / 左手

BEIJING, Oct. 19 (Xinhua) — Although China trimmed its U.S. government securities in August by a hefty 36.5 billion U.S. dollars, the country remains the United States’ largest foreign lender.

The cut in August, the biggest move in at least two years, reflected concerns over safety of the Treasuries as the U.S. was stripped of its AAA credit rating, according to analysts.

The move may suggest that policymakers in the world’s fastest-growing major economy are mulling over safer ways, amid the global market turmoil and the depreciating dollar, to invest its gigantic foreign exchange reserves.

LARGEST DEBT DUMPING

The last time China dumped U.S. debt was in June, 2009, when it pared 25.1 billion U.S. dollars of Treasuries. Every month, the country will buy or sell a certain, usually moderate, amount of the U.S. government bonds.

“It’s a normal investing action in the market, though it’s definitely related to the fluctuation caused by the S&P’s downgrade on the U.S. in August,” said Guo Tianyong, economics professor with the Central University of Finance and Economics.

In August, credit rating company Standard & Poor’s (S&P) lowered the United State’s top-tier AAA rating for the first time since granting it. The safety of the U.S. Treasuries has thus been put in doubt, and the greenback started to fall.

Other analysts deemed the move as a natural outcome of the country’s optimizing the investment structure of its foreign assets.

In recent years, China usually sold short-term Treasury bills to swap long-term bonds. The reduction of holdings this time might partly result from an array of short-term bills having matured, said Zhang Ming, deputy director of the Institute of World Economics and Politics under the Chinese Academy of Social Sciences (CASS).

“DOLLAR TRAP”

Despite being a regular market move, the record drop of China’s holdings of U.S. Treasuries may still add to market woes, as it revealed market concerns over the “dollar trap,” economists noted.

“China has run a current account surplus and a capital account surplus uninterruptedly for more than two decades. Inevitably this has led to an accumulation of foreign reserves,” Yu Yongding, an economist with the CASS, wrote in an article published recently.

He declared that China was caught in a “dollar trap” as it had to amass the dollar-denominated assets, despite the fact that risk of a depreciating dollar kept rising.

When China decided to slash a sizable amount of U.S. Treasuries in June 2009, the greenback had been losing value for months. The reading of U.S. dollar Index, a gauge of the dollar performance against a basket of currencies, tumbled to 75 points at the end of 2009 from 85 in the first few months of the year. The weak dollar eroded the value of dollar-denominated assets of many investors.

Loaded with an excess of dollars, the world’s largest exporter is facing a quandary: on the one hand, a weaker dollar could mean a big capital loss for China. On the other hand, the dollar is still deemed as a flight-to-safety compared with other investments. Thus the country seems stuck in the “dollar trap.”

“There is no clear evident [sic] that we are reducing our holdings of the U.S. Treasuries systemically and unremittingly,” said Zhang. “But whenever the dollar is depreciating, our foreign assets, with such a large portion being dollar-denominated, can hardly stay immune from the loss.”

WAYS TO PULL OUT

Economists agree that as the United States’ largest foreign creditor, China should contemplate ways to pull itself out of the “dollar trap,” as the U.S. economy is faltering with its debt piling up and its currency on the brink to depreciate.

China must make fuller use of the non-financial assets in its foreign reserves, as well as speed up the diversification of investing channels to resist a possible long-term weakening of the dollar, said Xia Bing, director of the Finance Research Institutes of the Development Research Center under the State Council.

Zheng Xinli, permanent vice chairman of China Center for International Economic Exchanges, has suggested that Chinese companies boost overseas investment as a way to absorb trade surpluses and fend off the dollar risk.

The dependency on the U.S. Treasuries partly revealed the country’s incapability to invest overseas, Zheng said. “Why did Germany and Japan not buy such a large amount of foreign bonds when they were running huge trade surpluses? That was because of their strong capability to invest overseas, which helped digest the excessive trade surpluses,” Zheng said.

But the fundamental way out may lie in adjusting the country’s macro-economic policies.

“China has tried various measures to slow down the growth of the foreign reserves and protect the value of its existing stock. Sadly, none has worked. With large capital inflows and a current account surplus, China’s foreign exchange reserves have continued to rise rapidly,” Yu said in his article.

The country must adjust or even annul those macro-economic policies that result in further accumulation of foreign exchange reserves. Only by doing this can China free itself from the “dollar trap,” Yu said.

Article link: http://news.xinhuanet.com/english2010/indepth/2011-10/20/c_131201185.htm

US distracts public with exchange rate issue [People’s Daily]

Posted in Anti-China propaganda exposure, Bourgeois parliamentary democracy, China, China-bashing, Currency wars, Economy, Japan, USA on October 15, 2011 by Zuo Shou / 左手

By Zhou Xiaoyuan (People’s Daily Overseas Edition)

October 12, 2011

Edited and Translated by People’s Daily Online

[T]he U.S. Senate[‘s] Currency Exchange Rate Oversight Reform Act of 2011…[is] a bill intended to force China to allow the value of its currency to rise at a faster rate. Regardless of whether the bill will be signed into law, the exchange rate issue has again brought China-U.S. relations into the global spotlight.

In fact, the United States has frequently played the “exchange rate” card over the past many years to press China to revalue its currency and to divert public attention from its domestic problems, especially economic problems. The current bill has escalated the RMB exchange rate issue and is aimed at putting more pressure on RMB appreciation, maintaining dollar hegemony and overcoming the ongoing debt crisis.

“The real intention of the United States is to distract attention from its domestic problems and to contain China,” said Xie Zuoshi, dean of the School of Economics and International Trade under Zhejiang University of Finance and Economics.

Despite knowing that faster RMB appreciation will not help redress the world’s economic imbalance, many U.S. politicians have nevertheless chosen to bash China over its currency policy because these politicians seldom admit incompetence and like to use China as a scapegoat, claiming that China stole the jobs of Americans. As China has overtaken Japan as the world’s second largest economy, containing China seems to be in the interests of the United States.

Zhao Xijun, deputy director of the Financial and Securities Institute under Renmin University of China, said that the exchange rate of a country’s currency is a matter of national sovereignty, and the country itself has the right to choose between fixed and floating exchange rate regimes according to its own conditions. China adopts a managed floating exchange rate regime based on market supply and demand, which suits the present situation of its economy and financial markets.

Edited by Zuo Shou

Article link: http://english.people.com.cn/90780/7615474.html

Commentary: Push for China currency bill based on an error [People’s Daily]

Posted in Bourgeois parliamentary democracy, Capitalism crisis early 21st century, China, China-bashing, China-US relations, Currency wars, Dalian, Early 21st Century global capitalist financial crisis' US origins, Economic crisis & decline, Economy, Obama, Premier Wen Jiabao, USA, Yuan appreciation on September 30, 2011 by Zuo Shou / 左手

By Xia Wenhui (Xinhua)

BEIJING, Sept. 16 (Xinhua) — U.S. Senate Democratic leader Harry Reid’s recent drive for a bill aimed at forcing up the Chinese currency erroneously links the yuan to his country’s depressed job market.

Reid may argue an undervalued yuan has cost many U.S. manufacturing jobs by giving China’s factories unfair advantages.

It’s easy for U.S. lawmakers to blame the huge U.S. trade deficit on China, which hit 273 billion U.S. dollars in 2010, when they search for reasons why more Americans cannot get jobs and are unhappy with the economic situation.

But Reid cannot deny the fact that the key reason for the current 9.1 percent unemployment rate is the lagging U.S. economy, which has no immediate link with the yuan.

Many analysts have agreed with this point. Phillip Swagel, a scholar with the American Enterprise Institute for Public Policy Research, has said a sharp appreciation of the yuan will only lead to an increase of 30 percent in U.S. commodities prices, adding more interest costs for government, enterprises and citizens.

A stronger yuan would not fundamentally change the structural problems that existed in the U.S. economy, such as unemployment and the trade deficit, said Swagel, who is also a former assistant secretary for economic policy at the U.S. Treasury Department.

Moreover, a mutually beneficial trade and economic relationship between the United States and China conforms to the common interests of the two countries.

As bilateral trade reached 285.65 billion dollars in the past eight months, Reid should agree that a stronger U.S.-China trade relationship in the past three decades has brought vast job opportunities for the two nations.

A sharp appreciation of the yuan will only deal a grave blow to China’s foreign trade and hurt its economy. And a volatile Chinese market will not help U.S. President Barack Obama’s ambition to dramatically boost U.S. exports to China.

Now with Obama asking the Congress to pass a jobs-creation package to cut tax and raise money, the White House is trying to boost growth and find more chances for trade and manufacturing.

For Beijing, a better economic relationship with the United States means smooth trade and strong support of the economy, especially when the world is on the edge of new economic turmoil.

Chinese Premier Wen Jiabao said Wednesday at the World Economic Forum Summer Davos meeting in northeast China’s port city of Dalian that China was willing to boost financial and economic cooperation with the United States and an open U.S. market and robust exports should be better options for both countries.

For the United States, lowering its barrier for investment and loosening its controls on exports to China would be more helpful than forcing the yuan’s revaluation.

Reid was no more than playing politics when he pushed the China currency bill in Congress, not the first time in recent years. The move will do no good for either the Chinese or the U.S. economies.

Article link: http://english.people.com.cn/90780/91344/7597979.html

Looking back on triumphs, problems of China’s 10 years in WTO [People’s Daily]

Posted in China, Currency wars, Economy, Reform and opening up, WTO on September 16, 2011 by Zuo Shou / 左手

Yao Jingyuan (QStheory.cn)
August 12, 2011

Since its accession to the WTO in 2001, China has actively participated in the globalization process and made remarkable achievements in foreign trade, foreign capital utilization and international economic cooperation. Overall, the country has achieved rapid economic growth and carried out major reforms over the past 10 years.

Remarkable achievements

1) China’s foreign trade volume up from sixth place in 2001 to second place in 2010

China’s foreign trade has developed by leaps and bounds in the past 10 years…The country’s foreign trade volume ranked second in the world last year only after the United States.

2) China improves trade structure

Since its accession to the WTO, China has made great efforts to achieve a balanced trade structure…

3) Comprehensive improvement in scale and quality of foreign investments

China has utilized foreign investments to optimize its capital allocation, advance technical progress and perfect the market-oriented economic system…China has become the second largest foreign investment recipient country in the world. The means of utilizing foreign investments have been diversified.

4) Continuous increase in outbound investments

Following China’s accession into the WTO, the country implemented the “go abroad” strategy, made new progress in overseas cooperation and investment and further expanded the scale and efficiency of its “going abroad.” Despite the severe impact of the international financial crisis, China’s outbound investments and international economic cooperation have been on the rise, playing positive roles in promoting China’s stable and relatively rapid economic development.

5) Great contributions of foreign trade to economic growth and social progress

China has remarkably accelerated the pace of developing a market-oriented economic system over the past decade and has basically established an open-style economic system. It has put a relatively stable system in place to safeguard participation in globalization. China’s comprehensive strength has considerably advanced, and its national image has comprehensively improved…

Problems

1) The export-orientated and extensive development mode of China, which will go against a stable and sustainable economic development, has not been fundamentally changed.

2) China’s foreign trade is unbalanced, China’s trade surplus is too large, and the pressure on RMB appreciation keeps increasing. In addition, the expanding trade surplus will affect the independence of China’s macroeconomic policies, increase the money supply objectively and lead to a heavy pressure on China’s macroeconomic control.

3) China’s overall trade environment has not fundamentally improved, and import prices are rising much faster than export prices for China. Due to the low labor cost of China, the prices of China’s export products have been at a low level for a long time and the foreign trade environment is worsening for China too.

4) The expansion of China’s foreign trade scale depends on the processing trade too much, and the grades and added value of China’s export products are too low.

Prospects

In the future, China will continue to implement the mutually beneficial and open strategy and further raise the level of the opening-up. While maintaining a steady growth of foreign trade, China will further optimize and upgrade its foreign trade structure. Pushed by factors such as the increasing domestic demand, strengthening import-supporting policies and the rising prices of international bulk products, China’s imports re expected to grow faster than exports, and China’s foreign trade is expected to be further balanced. As the trend of global economic recovery [sic] becomes more obvious, the international market environment for China’s foreign trade will also gradually improve. The prospect of China’s foreign trade is optimistic.

(The author is a special analyst for the Counselors’ Office of the State Council)

Edited by Zuo Shou

Article link: http://english.people.com.cn/90780/91344/7567751.html

U.S. debt ceiling deal is double-edge sword for China [Xinhua]

Posted in Capitalism crisis early 21st century, China, China-US relations, Currency wars, Early 21st Century global capitalist financial crisis' US origins, Economic crisis & decline, USA, Wall Street on September 11, 2011 by Zuo Shou / 左手

BEIJING, Aug. 8 (Xinhuanet) — The roller-coaster debate over raising the US national debt ceiling finally concluded after the two parties made compromises. The Democratic Party-led administration removed the political restraint of debt default before the general election in 2012, and the Republican Party-led House of Representatives secured a promise to cut government spending over the next decade.

The two parties had threatened each other using the interests of global creditors, staging a preview of next year’s general election. Meanwhile, the hidden trouble in the global financial market and economic recovery has temporarily been avoided.

The second round of quantitative easing adopted by the Federal Reserve ended one month ago, and the newly released US second-quarter economic growth rate fell far short of investors’ expectations, standing at only a little more than 1 percent. Debates about the risk of a second economic slump in the United States and a third round of quantitative easing monetary policy can be heard without end.

Given the situation, raising the debt ceiling will undoubtedly boost the confidence of investors. It is foreseeable that even if the economic growth of the United States loses its momentum, the third round of the quantitative easing will unlikely be adopted in the near future. As the economic growth of the world’s major economies is decelerating, the US debt ceiling deal is also good news to the world economy.

The confidence of investors was already particularly fragile because the international financial market was repeatedly attacked by the European sovereign debt crisis in the first half. The international financial market was in urgent need of the debt ceiling deal. This is why governments around the world, international economic organizations and even Wall Street all imposed pressure on the two parties of the United States government.

Global expectations for a deal to raise the US debt ceiling show that the US dollar remains the leading international currency. Republicans and Democrats have ignored the interests of creditors, trying to coerce the other side into submission. However, creditor countries have no choice but to increase holdings of US debt.

Unlike the southern European countries suffering from debt crises, the United States does not need tight economic policies or the financial support of international organizations and other countries, and the American people do not need to tighten their belts. As the issuer of a world currency, the United States has easily solved the debt crisis with an unreal 10-year commitment. Therefore, the dollar-centered international monetary system in the post-crisis era must be reformed, not to mention that the United States was responsible for the global financial crisis.

Although the compromise deal to raise the US debt ceiling has temporarily removed the Sword of Damocles hanging over the global economic recovery, the US debt problem remains a hidden danger in the world economy. The US debt limit has risen from 6.4 trillion US dollars nine years ago to 16.7 trillion US dollars at present. In addition, the United States has promised to cut its annual deficit over the next 10 years by more than 3 trillion US dollars.

Whether it can fulfill its promise remains to be seen. If the United States cannot tackle the massive debt through economic growth, tax increases and spending cuts, it will suffer from rising inflation, and the US dollar will continue to depreciate.

The United States raising its debt ceiling is a double-edged sword to China. In the short term, the US economy avoids suffering from a “double dip” and introduces the third round of the quantitative easing policy, which will reduce the global financial market risk. This is conducive to China’s steady economic growth because the United States is one of China’s most important export markets and is also conducive to the security of China’s U.S. dollar assets and keeps the exchange rate of the RMB against the U.S. dollar stable.

In the long term, the current dispute between Republicans and Democrats on the debt ceiling warns China that the United States will ignore the interests of creditors for the needs of domestic political struggles.

The United States is facing a dilemma between default and increasing debt. If one day the United States meets the domestic political obstacles on cutting debt and is facing a choice between default and passing on debt, China’s circumstances will be far worse than now.

It is undoubted that changing the existing pattern of intensively holding US dollar assets is necessary. However, it is more important to change the trend of continuing to increase US dollar assets in the future, which requires fundamental adjustments in the economic development model.

(Source: peopledaily.com.cn/By Li Xiangyang)

Article link: http://news.xinhuanet.com/english2010/indepth/2011-08/08/c_131035408.htm