>China’s Forex (re:USD) Reserve Growth or the World’s Largest Vendor Financer


China's Reserves

China has increased its foreign currency reserves nearly tenfold in the last eight years, amassing U.S. dollars at an incredible rate. Unlike historical strategies for building reserves, China’s foreign currency accumulation is not intended to strengthen their currency. Rather, China’s stated aim is to protect U.S. purchasing power. China presents itself as the friendly trading partner, saying it will gladly keep buying dollars so that the U.S. may keep buying Chinese products. But these massive U.S. dollar holdings also give China the ability to influence the U.S. currency. The Chinese have a keen understanding of the concept of leverage, and can use these reserves to maintain their current trade advantages. Any attempt to make China revalue the renminbi will surely be met by more threats from Beijing to diversify their reserves away from the U.S. dollar. Meanwhile, the United States has remained complacent about growing its foreign currency reserves, leaving the U.S. government powerless to curb the dollar’s recent plunge in value.
May 28, 2008

About MasterBlog

The MasterBlog
This entry was posted in Charts, China, Dollar, Economics, USA and tagged , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s