Amid a plunging US dollar, China has again threatened to diversify its mountain of dollar foreign reserves but US officials are unperturbed while experts do not see a rapid shift by Beijing.
A senior politician as well as a state banker in China last week both underscored the need for Beijing to shift part of its US$1.4 trillion in reserves toward presently stronger currencies, such as the euro.
Comments particularly by Cheng Siwei (成思危), vice chairman of the National People's Congress, that strong currencies ought to be given more weight in the Chinese reserves to offset the losses in weak ones, sent the greenback into a tailspin.
While China plans to gradually decrease its relative reliance on the greenback as a backstop currency, it is unlikely to do it in a rapid fashion, analysts say.
"Beijing is not about to shoot itself in the foot by carrying out a mass sell-off of greenbacks," Stratfor, a private US intelligence firm, said in a bulletin to clients.
SLOWDOWN
Such a move would wipe out much of China's foreign reserves "in less than the blink of an eye", it said, adding that Beijing wanted "just to slow or stop its purchase of new batches" of the greenback.
But the most recent Chinese suggestions do point to imminent changes in Beijing's method of currency reserve management -- changes being discussed in top Chinese political circles -- such as investing in assets with higher rates of return, like the euro or other investment instruments such as equity or energy assets, Stratfor said.
To date, only US$200 billion to US$400 billion of China's foreign currency reserves have been designated for spending elsewhere -- notably below the US$650 billion threshold suggested in March.
US financial and economic czars were unperturbed by the latest reports on Beijing's reserves diversification plans, underlining the dollar's status as the dominant reserve asset and traditional safe-haven currency.
Cheng's remarks sent tongues wagging in the US Congress, which has often been critical of Beijing's refusal to make its yuan currency more flexible.
At a congressional hearing on the US economic outlook, US Federal Reserve Chairman Ben Bernanke was asked to comment on the reports of Beijing reserves switch from the dollar.
"How worried are you about that? How likely is it to occur? How much credibility do you give this statement that was made yesterday?" asked Senator Chuck Schumer, a proponent of sanctions on Beijing if it does not make the yuan more flexible.
BERNANKE'S VIEW
Bernanke said, "I'm not particularly concerned about any major change in the [reserves] holdings of China or any other country."
He noted however that "sovereign wealth funds" -- investment vehicles funded by a country's foreign reserves -- and "portions of reserve accumulations" were reviewing their bets across currencies for higher returns.
"But again, I don't see any significant change in the broad holdings of dollars around the country -- around the world. Dollars remain the dominant reserve asset and I expect that to continue to be the case," Bernanke said.
PAULSON WEIGHS IN
US Secretary of the Treasury Henry Paulson also defended the dollar's position.
It has been the world's reserve currency since World War II and "there's a reason," he said.
"I put the US economy up against any in the world in terms of competitiveness," he said.
Statements from Chinese officials that their currency reserves were too heavily skewed toward the dollar are not new.
Three months ago, when US lawmakers threatened sanctions against China over the yuan issue, reports said Beijing hinted using a "nuclear option" -- unloading its US dollar denominated assets to sink the greenback.
US President George W. Bush cast doubt on the reports but responded that "it would be foolhardy for them to do this" and that such a move would be more detrimental to China than the US.
Bush was confident the US and China could resolve any of their differences "in a cordial way."
A magnitude 7.0 earthquake struck off Yilan at 11:05pm yesterday, the Central Weather Administration (CWA) said. The epicenter was located at sea, about 32.3km east of Yilan County Hall, at a depth of 72.8km, CWA data showed There were no immediate reports of damage. The intensity of the quake, which gauges the actual effect of a seismic event, measured 4 in Yilan County area on Taiwan’s seven-tier intensity scale, the data showed. It measured 4 in other parts of eastern, northern and central Taiwan as well as Tainan, and 3 in Kaohsiung and Pingtung County, and 2 in Lienchiang and Penghu counties and 1
FOREIGN INTERFERENCE: Beijing would likely intensify public opinion warfare in next year’s local elections to prevent Lai from getting re-elected, the ‘Yomiuri Shimbun’ said Internal documents from a Chinese artificial intelligence (AI) company indicated that China has been using the technology to intervene in foreign elections, including propaganda targeting Taiwan’s local elections next year and presidential elections in 2028, a Japanese newspaper reported yesterday. The Institute of National Security of Vanderbilt University obtained nearly 400 pages of documents from GoLaxy, a company with ties to the Chinese government, and found evidence that it had apparently deployed sophisticated, AI-driven propaganda campaigns in Hong Kong and Taiwan to shape public opinion, the Yomiuri Shimbun reported. GoLaxy provides insights, situation analysis and public opinion-shaping technology by conducting network surveillance
‘POLITICAL GAME’: DPP lawmakers said the motion would not meet the legislative threshold needed, and accused the KMT and the TPP of trivializing the Constitution The Legislative Yuan yesterday approved a motion to initiate impeachment proceedings against President William Lai (賴清德), saying he had undermined Taiwan’s constitutional order and democracy. The motion was approved 61-50 by lawmakers from the main opposition Chinese Nationalist Party (KMT) and the smaller Taiwan People’s Party (TPP), who together hold a legislative majority. Under the motion, a roll call vote for impeachment would be held on May 19 next year, after various hearings are held and Lai is given the chance to defend himself. The move came after Lai on Monday last week did not promulgate an amendment passed by the legislature that
AFTERMATH: The Taipei City Government said it received 39 minor incident reports including gas leaks, water leaks and outages, and a damaged traffic signal A magnitude 7.0 earthquake struck off Taiwan’s northeastern coast late on Saturday, producing only two major aftershocks as of yesterday noon, the Central Weather Administration (CWA) said. The limited aftershocks contrast with last year’s major earthquake in Hualien County, as Saturday’s earthquake occurred at a greater depth in a subduction zone. Saturday’s earthquake struck at 11:05pm, with its hypocenter about 32.3km east of Yilan County Hall, at a depth of 72.8km. Shaking was felt in 17 administrative regions north of Tainan and in eastern Taiwan, reaching intensity level 4 on Taiwan’s seven-tier seismic scale, the CWA said. In Hualien, the
RSS