Sometimes one can get a different perspective on China-U.S. relations from China Daily, a government controlled English publication than one can find reported on in the United States.
As a follow-up to Vice President Joe Biden’s trip to China, the China Daily reported:
Zhu Chao, assistant dean of the School of Finance at the Capital University of Economics and Business, said Biden’s promises were more symbolic than meaningful.
Analysts said that the long-term strategy for China to reduce dollar asset risks is to boost the global profile of the yuan.
“China needs to find an alternative for the US dollar, which means that it must promote the internationalization of the yuan,” Xiang said. But he added that China needs to have a freely
convertible yuan, market-based interest rates and an open financial market in order to achieve that goal.Zhu also advised that China should take active measures to shift away from US Treasury related risk. “For example, China and Russia could hold each other’s currencies as reserves, and use more yuan in the settlement of bilateral trade,” Zhu said.
Stephen Roach, the non-executive chairman of Morgan Stanley Asia, said that the US debt crisis has shaken China’s confidence in Washington but the pro-consumption shift in its economic structure will help reduce the pace of its foreign-exchange accumulation.
“The US debt crisis has taken a serious toll on China’s confidence in Washington’s economic stewardship,” Roach said in a research note.
The U.S. budget deficits and for that matter the American way of life is being financed by debt. There is no question that the Chinese and others would prefer an alternative to
holding U.S. Treasury securities, especially with a near zero yield. The luxury of the rest of the world financing the American way of life will diminish over time, the only question is when.
For the full China Daily article: http://www.chinadaily.com.cn/usa/us/2011biden/2011-08/19/content_13146676.htm
Filed under: China, U.S. Economy, US Dollar
It’s worth noting that China Daily is a mouthpiece intended to make Chinese citizens happy. Chinese withdrawal from American debt is unlikely anytime soon, as is the flotation of the RMB in a free market (near doubling export costs is something China is actively seeking to avoid). But people on the street here are angry about the percieved risks of US debt so the machine goes into overdrive to tell them what they want to hear – and once they’ve forgotten about it, things will carry on as normal.