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Rising Dragon-We Make It;We Sell It;We Consume It

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March 15, 2009 – Comments (1)

From Asia Times On-Line 

Wen puts US honor on the debt line
By Olivia Chung

HONG KONG - Chinese Premier Wen Jiabao, faced with growing concern that United States efforts to stem the financial crisis will hit the value of China's vast holdings of US debt, used the world's press on Friday to demand that the US honor its promises.

Wen told a press conference after the conclusion of a two-week meeting of the country's legislators that he was "a little bit worried" about the safety of Chinese assets in the US, and called on the US "to maintain its good credit , to honor its promises and to guarantee the safety of China's assets." He also reiterated that other countries had no right to push China into appreciating its currency, the yuanVarious efforts by the US to resolve the country's financial crisis by selling ever more debt to pump money into the financial system are raising concern that this will drive up inflation and pull down the value of the US dollar, which would cut the value of debt held by China, the largest creditor of the US.

We are very concerned about the economic developments in the US economy," Wen said. "The US administration of President Barack Obama has taken a series of measures to counter the financial crisis. We look forward to the effectiveness of those measures."

We have lent a huge amount of money to the United States and of course we're concerned about the security of our assets and, to be honest, I am a little bit worried," Wen said in Beijing after conclusion of the second session of the 11th National People's Congress (NPC). "That's why here I would like to urge the US to keep its commitment and promise to ensure the safety of Chinese assets

About US$1 trillion of China's foreign exchange reserves, which increased 27% last year to $1.95 trillion, is invested in US government bonds and other securities. China held $696.2 billion in US government bonds as of December, up from $681.9 billion a month earlier, according to the US Treasury international capital flow report released on February 18.

China has accelerated its purchases of Treasury debt since August 2008, when holdings grew by $23.7 billion month-on-month to US$541.4 billion. By September, it had holdings of Treasury debt worth $585 billion, more than Japan, previously the top holder of US Treasuries. In August 2008, Japan cut its holdings to $573 billion from $586 billion.

Wen reiterated China's principle of guaranteeing the "safety, liquidity and good value" of its foreign exchange reserves and diversifying the investment of the reserves.

Wen also ruled out any further strengthening of the Chinese currency in the intermediate future. He said no country had the right to press for either the devaluation or appreciation of the yuan. A stronger yuan would drive up the price of exports to the US while making it cheaper for US goods to be imported to China

The yuan "has appreciated since the European and Asian currencies have dropped in recent year, in addition to the yuan's 21% appreciation against the dollar since July 2007", he said.

China, whose currency is not at present fully convertible into other currencies, is moving to make it more fully used in international trade. Wen said that a plan for the settlement of trade in yuan had been formulated and would be carried out as quickly as possible once it was approved by the State Council, or cabinet

A pilot project involving yuan-denominated settlement of trade deals would start from Hong Kong, Guo Qingping, assistant governor of the People's Bank of China, or the central bank, said on Wednesday in Beijing.

Referring to China's ability to survive in the global downturn, Wen said the country was fully prepared for even worse conditions and had long-term preparations "with plenty of ammunition" to cope

Wen emphasized that although China would have difficulty in achieving its goal of 8% economic growth this year, it would be possible with "considerable efforts", given the advantages of a huge domestic market, a large amount of labor and a sound and stable financial sector

"With a 1.3 billion population ... China has a bigger market than those of the Europe and the United States," Wen said.

"We make it; We sell it; We Consume It-  That Includes Food & Fuel."- Added by Milpo

1 Comments – Post Your Own

#1) On March 15, 2009 at 10:53 AM, VIS46 (41.95) wrote:

It is funny for Wen to complain.No body put a knife on his neck and asked him to buy the US trasuries.He could dump it any day.US dollar is the only place to hide when there is turmoil in the world.

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