Posts Tagged ‘United States’
by Zhou Xin and Koh Gui Qing
Wed Jul 20, 2011 9:31am EDT
The urging from China’s currency regulator came as U.S. leaders tried to hammer out an 11th-hour deal to raise a $14.3 trillion debt ceiling for the United States before it runs out of money to cover all its bills on August 2.
“We hope the U.S. government will take responsible policies and measures to boost global financial market confidence and respect and protect the interests of investors,” the State Administration of Foreign Exchange said.
The remarks, published on its website, were carried as a response to queries on whether Beijing will cut its investment in U.S. Treasuries following through from rating agencies saying they may cut the United States’ credit rating.
The agency, which manages China’s $3.2 trillion in foreign exchange reserves, the world’s largest, said its buying and selling of Treasuries were part of normal investment operations.
Due to the size of China’s reserves, Beijing has few choices but to invest the bulk of the stash in U.S. Treasuries, by far the world’s biggest and most liquid asset class.
About two-thirds of China’s reserves are estimated to be invested in dollar assets, ranking Beijing as the biggest creditor to the United States.
While China is keen to cut its reliance on the dollar by investing its reserves in other assets, its currency regulator acknowledged the crucial role of Treasuries by saying it is “an important investment product for both U.S. domestic and international institutional investors.”
The currency regulator also argued it cannot invest too much of China’s reserves in commodities such as oil, gold and silver these markets are too volatile and small.
“Chinese companies and households consume a large amount of gold and crude oil,” it said.
“If we use much of our foreign exchange reserves to invest in such areas, we could push up market prices, which may affect our people’s consumption and economic development.”
Read the entire article HERE.
By Simon Kennedy – Jan 27, 2011 1:13 AM PT
China Investment Corp. Vice Chairman Gao Xiqing said that central banks’ quantitative easing policies are hurting the value of money just one day after the Federal Reserve maintained plans to buy $600 billion of Treasuries.
“You know money is gradually becoming not worth the paper it’s printed on,” Gao said at an event sponsored by HSBC Holdings Plc at the World Economic Forum in Davos, Switzerland today. Recent gains in commodity and food prices reflect the “long-term view” of investors that prices will accelerate, he said.
The Fed and the European Central Bank have kept their benchmark interest rates at record lows to spur their economic recoveries, triggering concern in emerging markets that the resulting flood of capital will undermine currencies such as the dollar and spark inflation.
“We’ve started collecting Zimbabwe notes,” Gao said, referring to an economy whose currency was scrapped in 2009 after inflation reached 500 billion percent. He noted investors are also discussing whether central banks will pursue more rounds of quantitative easing.
The Fed yesterday reiterated its intention to keep its benchmark “exceptionally low.”
Gao, whose sovereign wealth fund manages about $300 billion, signaled that while industrial nations are now more welcoming of China’s money following the financial crisis, their past criticisms may hurt their ability to attract it.
“People have long memories,” he said. “We have this yo- yo when being treated by a few major countries.”
“In many countries we are now treated differently,” he said. “We should be the most welcome investor.”
Inflation concerns have become a new theme in the hallways of Davos’s Congress Center as emerging markets including China tighten policy and record food prices fan social unrest in North Africa. Chinese inflation ran at 9.6 percent in December.
Inflation nevertheless is not an immediate concern and prices for securities that offer protection against it are “not up there yet,” Gao said. A record $13 billion auction of 10- year Treasury Inflation Protected Securities last week attracted lower-than-average demand.
“In shorter run, you look at the numbers and fundamentals and you think there’s some inflation pressure but it’s not something we have to worry about,” Gao said.
Read the entire article HERE.