China 'may cut US debt holdings' US-Chinese trade relations are coming under increasing strain China may reduce the amount of US bonds it holds as part of its foreign exchange reserves, an influential official has reportedly said. The remarks, made by Parliamentary vice-chairman Cheng Siwei, triggered a fall in the US dollar against leading currencies in European trading. China is a major funder of US debt, holding about £260bn (£149bn) in US Treasury bonds - second only to Japan. Any reduction in China's dollar assets could hit the US economy. Should China cut its US dollar holdings, this could drive up long-term yields on US bonds, which could in turn put pressure on interest rates. Commercial strain China's Central Bank said that Mr Cheng was speaking in a private capacity and his remarks did not represent government policy. China can increase buying of US products and gradually reduce its holdings of US bonds Cheng Siwei, vice-premier of the Chinese national parliament However, with Chinese president Hu Jintao due to visit Washington later this month, the comments are sensitive and could put further pressure on the two countries' already strained trading relationship. US officials are lobbying Beijing to let the yuan trade more freely against other currencies, arguing that its value has been artificially depressed. This imbalance, Washington believes, allows China to export goods more cheaply and has contributed to its $202bn trade deficit with China. Hong Kong newspaper Wen Wei Po reported that Mr Cheng - who outranks cabinet ministers but does not decide government policy - had called for a change in the make-up of its foreign reserves holdings. "China can stop buying dollar-denominated bonds, increase buying of US products and gradually reduce its holdings of US bonds," he said. Spreading its risk Beijing has been spreading its risk by accumulating more non-US dollar assets in recent times. However, economists believe that China will not take steps that will unduly weaken the US dollar and needs to continue accumulating dollar assets to prevent the yuan rising too far in value. In European trading, the US dollar fell against the euro, the British pound and the Japanese yen.
The US is now about 9 trillion dollars in debt, mainly to China and Japan. If they lose confidence in US investments, the dollar could take a beating. Perhaps the only thing keeping them from diversifying into euros is the effect a weakened dollar would have on their own extensive US dollar holdings. The trade deficit with China is huge - about 200 billion. Put simply, American are living on borrowed money. Even the war in Iraq (and comming war in Iran?) was financed with borrowed foreign money.
Yes. Question is when and how bad. As long as the world considers the US the backbone of the international economy, they'll find ways to bail us out. As soon as we lose (apparent) top-dog status, i.e., they can get by without us, they'll gladly abandon us.
I agree. Hope you have all locked in your mortgages. Time to learn Mandarin? Maybe the renmibi will become the world's reserve currency.
<div class='quotetop'>QUOTE(jared2 @ Apr 4 2006, 12:35 PM) [snapback]234731[/snapback]</div> My husband and I carry zero debt, unless there's a massive collapse of the economy and stock market, we should be okay. I hope the State Dept. has a plan of how to play China and India off each other, for the next 20-50 years. That might give us some time to get our domestic acts together.
Unfortunely, it is part of the global economy game. When it is too expensive to do business in India and China, companies will outsource the work somewhere else. Vietnam has already starting to be the next India. Universities in every corners, and companies like Intel investing hundreds of millions to build new plants. In 5 years, watch out China and India. Chinese and Indians will be beotching about how Vietnamese stole all their jobs and get paid only penies to the dollar. Sound familar? :lol:
<div class='quotetop'>QUOTE(jared2 @ Apr 4 2006, 11:10 AM) [snapback]234718[/snapback]</div> Well crap. With the new changes in the Bankrupsty laws, it's going to be even harder to get out of debt. But what if we borrow from Germany to pay the Chinese and then from the Swiss to pay the Germans? That might work. Then again, in a couple days when complete stability is sustained in Iraq, the rest of the Middle East will see what great peacemakers Americans are and they will all come together to pay off our debt as a sign of their eternal gratitude. GW will receive the Nobel Peace Prize, Mars will terraform, and everything will all work out.
<div class='quotetop'>QUOTE(TonyPSchaefer @ Apr 4 2006, 06:57 PM) [snapback]235012[/snapback]</div> Thank goodness there's at least one person with practical objectives here!
Who was stupid enough to put us in this much debt to the Chinese? Who needs a war to take America down? All they have to do is unload their dollars and collapse our economy. What a nice, clean, cheap war. Eliminate your enemy by collapsing their economy. BTW I predicted this would be the new way countries wage "war". And wars won't be fought over land or resources, despite what is happening in Iraq. That's history. And the ideological wars are becoming dinosaurs too. It's going to be all about money. Economic war.
Exactly, Godiva. We are playing "bully of the playground" and other countries are playing "geek with a chess board." While we're out spending and borrowing to support our runnings amuck, they are strategically and quietly buying our country one bond note at a time. When the time is right, they will call the debts due, crash our economy, and take over. Checkmate.
<div class='quotetop'>QUOTE(jared2 @ Apr 4 2006, 09:10 AM) [snapback]234718[/snapback]</div> actually the us debt is 44 TRILLION DOLLARS if you count off the books debt too. this is about $150,000 for each person in the country. Funny how they mislead by having and talking about only on the books debt. Kinda like unemployment figures where they only count current people on unemployment and not those who have given up looking or those underemployed working only a few hours per week. Ya really gotta read between the lines.
<div class='quotetop'>QUOTE(TonyPSchaefer @ Apr 5 2006, 11:55 AM) [snapback]235318[/snapback]</div> Don't forget.....real estate too.
<div class='quotetop'>QUOTE(Godiva @ Apr 6 2006, 12:33 AM) [snapback]235714[/snapback]</div> I like the chess analogy, profoundly poignant Wholeheartedly agree with both of you
I don't think the dollar will crash. I think it will be a slow steady slide. A "controlled fall" as our creditor nations ease out of U.S. bonds, rather than dumping them all at once. It could happen over the course of a decade so that it just looks like a somewhat higher-than-normal rate of inflation, and the government can call it something nice, like a "cyclical downturn." Of course, normal folks' buying power will drop, and drop, and drop.
