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China’s $3 trillion dilemma: What to do with all that cash? - The Washington Post
Keywords:
A recent study by the IMF shows that China has accumulated foreign exchange reserves that are twice what would be needed for traditional purposes such as supporting the economy in a financial crisis. China is still very much a developing country with per capita annual income of $3000, low consumer spending, and rising inflation. This makes the policy of accumulating reserves and preserving an undervalued exchange rate to support export companies counterproductive. There is growing debate about this as inflation is becoming difficult to control. Yu Yongding, an advisor to the PBOC monetary policy committee says China as a developing country should not be exporting capital, which should be used to raise living standards. A rising exchange rate would increase spending power of people throughout China. Fan Gang, head of China's National Economic Research Institute, was a member of the central bank monetary policy committee. He wrote in a recent essay arguing for a higher exchange rate, and societal, tax and other changes that help increase China's household spending. Central Bank governor Zhou Xiaochuan said recently that China's foreign exchange reserves have exceeded reasonable levels that the country needs, adding to inflation risks and making it difficult to conduct monetary policy. The reserves are now over $3 trillion, pasing that mark in March 2011 after increasing 25% in the last year.
China's foreign exchange reserves and problems with inflation
05/09/2006
A recent IMF study points out that China's $3 trillion foreign exchange reserves are twice what China needs for traditional purposes such as supporting the economy in a financial crisis. According to China's central bank governor these reserves are making it difficult to control inflation. Experts also say this makes little sense for a developing country with low percapita incomes. Most of this money is invested in U.S. Treasury securities and is not put to productive uses.
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Changes in China's export driven economy
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China Manufacturers Survive by Moving to Asian Neighbors
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Progress on the appreciation of China's currency, the yuan, in 2010-2013
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U.S. Strains Mount After China Devalues Yuan
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Frankly Speaking on the great recession, the dollar and trade deficits 2009-2012
10/14/2009
Peter Morici of the University of Maryland and others express their view in 2009 on what needs to happen. The dollar Morici says needs to be devalued 40-50% against the yuan. He says that while China talks about an alternative reserve currency, it is part of the problem. And the crisis was caused by the U.S. demand that was inflated by the cheap yuan and then collapsed, says Morici.
Grouped Articles
Wall Street Journal 10/04/2011
Europeâs Debt Crisis Is Casting a Shadow Over China
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Peter Morici: Behind the Dollar's Dog Days
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New dynamic for China's yuan in 2012- outflows of capital from China and weakening of the yuan
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Currency issues and U.S.-China trade.
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Trade between the USA and China and currency issues. Obama administration's efforts to address currency issues and fair trade issues with other countries.
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Foxconn to Raise Salaries for Workers by Up to 25%
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China's Trade Balance
03/10/2011
Every $1 increase in oil prices reduces China's trade deficit by $1.9 billion, according to one estimate. China had a trade deficit in February 2011. This reduces the pressures on the yuan. See the IMF forecast on China's shrinking trade surplus in 2011-2014.
Grouped Articles
Wall Street Journal 10/04/2011
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China’s $3 trillion dilemma: What to do with all that cash? - The Washington Post
Washington Post 04/19/2011
No Appreciation for the Rising Yuan
Wall Street Journal 06/21/2011
Pressure Grows on China to Spur Domestic Consumption
Wall Street Journal 08/07/2011
Tallying the Toll of U.S.-China Trade
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Expert opinion on the appreciation of the yuan.
03/29/2010
One view from Yale University is that an appreciation of China's currency will not have alarge impact on American jobs, which is the opposite of what is generally thought.
Grouped Articles
Wall Street Journal 10/04/2011
Wall Street Journal 03/29/2010
Europeâs Debt Crisis Is Casting a Shadow Over China
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An Accord (and Lessons) to Remember
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China's Dangerous Overvaluation
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Roubini on China, currency issues, and domestic consumption in China.
05/17/2010
By letting the yuan China can shift the benefits to households, who will have more purchasing power, and reverse the shift that has taken place in the last 10 years, with domestic consumption making up about 36% of GDP- down by about 10 points from ten years earlier. State owned companies gained at the expense of households, as did infrastructure spending, but it is leading to misallocation of investments and hurting households. As a result China will hit a growth wall in the next 2-3 years, says Roubini.
Grouped Articles
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New York Times 09/30/2010
Yuan Revaluation for China's Own Sake
Wall Street Journal 10/02/2010
New York Times 09/25/2010
Economic growth and exchange rates for dollar, yen, yuan and euro- policy change in China, Japan and Europe.
08/17/2007
How policy and mood is shifting in China, Japan and Europe for exchange rates between currencies. The desire to be less dependent on exports and increase domestic demand in these countries just as thrifty consumers in the US make earlier policies obsolete.
Grouped Articles
Yen's Fall Aids Japan, Worries Others
Wall Street Journal 05/13/2013
Yen Slumps to Six-Month Low Against Dollar
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Japan Faces Uphill Battle in Curbing Yen's Rise
Wall Street Journal 08/04/2010
Brawny Yuan Stands Apart from the Crowd
Wall Street Journal 12/10/2013
Asia Seen as Better Able to Deflect Waves From U.S.
New York Times 08/17/2007
Geithner Hints at Harder Line on China Trade
New York Times 01/23/2009
Robert Lighthizer and other experts call for trade and globalization practices that work for the U.S.
01/06/2010
The failure of the establishment of both parties in the USA to take action in the face of the loss of 5.6 million jobs in the last decade, with $4.3 trillion in trade imbalances. An issue which resonates with voters in the US and could lead to a fundamental realignent of American attitudes to globalization and free trade. The feeling that the free-trade deck is stacked against the USA by Asian countries. China's efforts to keep the yuan dollar exchange rate at levels that favor exports. China's accumulation of over $3 trillion in dollar reserves that are parked mostly in Treasury's that keep U.S. interests low. Distortons in the global economy from the failure to rebalance the world economy hurts China and the U.S.
Grouped Articles
Wall Street Journal 10/04/2011
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New York Times 09/30/2010
Wall Street Journal 10/02/2010
The Engine That Pulled Us Out of Recession
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What’s Our Duty to the People Globalization Leaves Behind?
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China- inflation, the currency, and economic mismanagement, the situation in 2010-2012
01/07/2010
Efforts to strengthen the currency are being resisted by export interests. Inflation is hurting consumers who are limited to earning 2.75% interest on savings, with the interest rate spread designed to help banks earn their way through bad loans made during the stimulus lending binge. A massive reallocation of resources away from consumers and towards lending to state-owned companies which create overcapacity in industries and engage in real estate speculation. Far from rebalancing the world economy this will affect internal growth in China.
Grouped Articles
Wall Street Journal 07/15/2013
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Wall Street Journal 09/04/2010
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World Bank Deletes Critical Passage on China
Wall Street Journal 07/05/2015
New York Times 01/20/2011
U.S. and China- Trade Wars.
12/30/2009
American action against products from China that are dumped on the U.S. market. The unervalued Chinese currency and subsidized exports.
Grouped Articles
Wall Street Journal 10/04/2011
Economist 03/31/2010
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New York Times 05/17/2010
How China Lost Its Mojo: One Town's Story
Wall Street Journal 09/16/2013
An Accord (and Lessons) to Remember
Wall Street Journal 09/21/2010
US-China trade relations: Speak less softly, carry a stick
Economist 09/25/2010
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