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China’s yuan at record ahead of Washington talks
HONG KONG (MarketWatch) — China’s yuan rose to a fresh record against the U.S. dollar on Monday, edging up a fraction from its close in the previous trading session ahead of senior-level talks between Chinese and U.S. officials, slated for later Monday in Washington. China’s central bank set the official central parity rate for the U.S. dollar at 6.4988 yuan, compared to Friday’s setting of 6.5003 yuan. The level represented a record high against the dollar, according to the state-run Xinhua news agency. The U.S. dollar dropped below the 6.50-level for the first time on April 29, and was at 6.4955 around midday in East Asia on Monday, according to FactSet data.
Chinese Know Real Value
The International Monetary Fund reported without fanfare recently its projection that the candidate who wins the 2012 U.S. presidential election will be the last U.S. President to lead the world’s richest super power.
The IMF prediction is based on its calculation that within the next five years China will surpass the United States as the world’s largest economy.
The IMF forecast differs from that of most traditional forecasts, which put the date China’s economy outstrips the U.S. at least a decade or two into the future. However, those traditional forecasters are looking at value as calculated in currency—and as we at WealthCycles.com have reiterated many times, currency lies.
PBOC’s Zhou Urges Cutting China’s $3 Trillion of Foreign-Exchange Reserves
Zhou Xiaochuan, governor of the People’s Bank of China. Photographer: Qilai Shen/Bloomberg
China needs to reduce its foreign- exchange reserves as they exceed the level the nation requires, central bank Governor Zhou Xiaochuan said.
The management and diversification of the holdings, which topped $3 trillion at the end of March, should be improved, Zhou said after a speech at Tsinghua University in Beijing late yesterday. The rapid accumulation is putting pressure on the sterilization operations of the People’s Bank of China, he said.
The nation’s foreign-exchange reserves climbed $197 billion in the first quarter, reflecting global imbalances that Group of 20 finance ministers agreed last week to address through deeper scrutiny of their economic policies. China’s surging holdings are fueling inflation that accelerated last month to the highest in 32 months, prompting the government to boost banks’ reserve requirements this week for the fourth time this year.
“Foreign-exchange reserves have exceeded the reasonable levels that we actually need,” Zhou said. “The rapid increase in reserves may have led to excessive liquidity and has exerted significant sterilization pressure. If the government doesn’t strike the right balance with its policies, the build-up could cause big risks,” he said, without elaborating.
The world’s second-biggest economy grew 9.7 percent in the first quarter from a year earlier, faster than economists had forecast, and consumer prices climbed Read more…
China Takes Giant Step Towards Making the Yuan the World’s Reserve Currency
For years, I’ve been writing about the long-term decline of the Dollar, and the rise of the Chinese Yuan … and it’s potential to become the world’s next reserve currency.
As I pointed out in 2007, many countries have started moving out of the Dollar as the basis for international trade settlements, including:
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Venezuela and 12 other Latin American countries as well as Cuba
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Many other countries
In 2008, I wrote: Read more…
Chinese President Hu Disses the Dollar; Says U.S. System is a ‘Product of the Past’
“The current international currency system is the product of the past,” Hu noted in answers to questions submitted to his foreign ministry office by The Wall Street Journal and the Washington Post.
BEIJING—Chinese President Hu Jintao emphasized the need for cooperation with the U.S. in areas from new energy to space ahead of his visit to Washington this week, but he called the present U.S. dollar-dominated currency system a “product of the past” and highlighted moves to turn the yuan into a global currency.
“We both stand to gain from a sound China-U.S. relationship, and lose from confrontation,” Hu said in written answers to questions from The Wall Street Journal and the Washington Post.
Hu acknowledged “some differences and sensitive issues between us,” but his tone was generally compromising, and he avoided specific mention of some of the controversial issues that have dogged relations with the U.S. over the past year or so—including U.S. arms sales to Taiwan that led to a freeze in military relations between the world’s sole superpower and its rising Asian rival. Read more…
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