| If China decreased her massive holdings of US dollars, what would happen? | |
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| Jun 19, 2007 03:10 |   |
 | According to US Treasury's statistics, China decreased about 5.8 billion US dollars of her holdings of US national bonds in April for the first time. China is one of the second largest holder of US national bonds outside US and she takes up 10 % of the circulating US national bonds. The first one is Japan. Till the end of April, Japan holds 614.8 billion US dollars. The report has aroused many people's attention. Does this suggest that China will sell her massive holdings of US dollars on a large scale? That is what people are concerned about. Although Chinese government emphasized several times that China would not decrease her holdings of US dollars, people are still sensitive about this issue and afraid that China will do so. If China made a decision to decrease her massive holdings of US dollars, what would happen? Is there anyone who has his or her understanding on this issue? Looking forward to hear your voice. |
| Jun 19, 2007 04:53 | #1 |
| US dollar will be cheap? 1 USD=5 CNY? |
| Jun 19, 2007 05:36 | #2 |
| China will not sell them if it is a risk to the world economy, or equally a risk to China's or the US economy, so I wouldn't be worrying on that score. If China sells them someone else buys them! Other countries or private investors. If China sells them it will be holding cash loses it interest compared with having the money in treasury bonds. So it will have to find alternative safe investments... Euro bonds perhaps. And the people who sold them will perhaps buy US bonds that China sold! (Ok it's a bit more complex than that, but essentially true). Of course, if no one wants to buy US bonds we could have a problem, but that has not been true so far...and see my opening sentence! The issue behind this is that the US is in debt to the rest of the world (but that does not necessarily matter, another issue) and China has massive savings against the rest of the world. China could spend its savings, either on consumption or on investment. But the economy is growing at such a fast rate that accelerating it further would not be wise. China is slowly revaluing the RMB as part of the strategy (as so politely requested by the USA !!!) and can use the savings in the future to keep the economy going when it finally begins to slow down. No need to panic! |
| Jun 19, 2007 17:18 | #3 |
| I really hope both the U.S.A and China find a way to ease the onslaught of pollution being created by stockpiling huge amounts of money. It has already been determined that at the current rate of consumption of fossil fuels, the world is getting warmer, the ice caps are melting and the skies are turning grayer. Perhaps the Chinese government might think about investing their savings in taking steps to clean up the environment????? Imagine all the jobs created by just trying to restore one polluted river back into a natural habitat where fish and waterbirds can coexist. So, Zoey, I would recommend China sell it's investment's in U.S. bonds and start implementing an environmental task force to employ technologies of renewable resources. Also, enforcement of the one-child policy would be beneficial to everyone's future. __WINDENERGY__ |
| Jun 19, 2007 20:47 | #4 |
| Well, if China decides to decrease or sell her massive holdings of US dollars, the exchange rate of US dollar will surely be affected.Just as Paul said China is trying to find other alternative investments to diversify her foreign exchange reserve. US Treasury minster said that it will not menace US economy if overseas holders decrease their holdings of US dollars. |
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