Asia Times: China inoculates itself against dollar collapse

[marmar]

DOLLAR CRISIS IN THE MAKING, Part 3
China inoculates itself against dollar collapse

By W Joseph Stroupe

This article concludes a three-part report.

PART 1: Before the stampede
PART 2: The not-so-safe haven

There is mounting evidence that China's central bank is undertaking the process of divesting itself of longer-dated US Treasuries in favor of shorter-dated ones.

There is also mounting evidence that China's increasingly energetic new campaign of capitalizing on the global crisis by making resource buys across the globe may be (1) helping its central bank to decrease exposure to the dollar, while (2) simultaneously positioning China to make much greater profit on its investment of its reserves into hard assets whose prices are now greatly beaten down, while (3) also affording it greatly increased control of strategic resources and the geopolitical clout that goes with it. This is turning out to be a win-win-win situation for China as it capitalizes upon the important opportunities afforded it by the present global crisis.

The exact size and the precise composition of China's huge forex reserves, the exact degree of China's exposure to the dollar and its viable options, if any, in decreasing that exposure are matters of intense interest, because China's policies in this regard could have gargantuan implications for the US and the global financial systems and for the dollar.

One of the foremost experts who continues to research and track these matters is the highly respected Brad W Setser, a Fellow for Geoeconomics at the prestigious Council on Foreign Relations in New York. His work is providing significantly deeper insight into the size and composition of China's reserves and is affording the world a better view of that country's options in managing its reserves going forward and what the implications of those options might be.

Another expert whose ongoing work is also adding very important, deeper insight into such matters is the highly respected Rachel Ziemba, lead analyst on China and the oil exporting economies at the prestigious RGE Monitor, founded by Nouriel Roubini. .........(more)

The complete piece is at: http://www.atimes.com/atimes/China_Business/KC18Cb01.html

[rollingrock]

1. I wouldn't put my money in any US instruments

regardless of the maturity date.

[terisan]

2. Rescuing the Banks from their toxic paper has made US paper dollar toxic. nt

[pscot]

3. It will be interesting to see what happens

when Hugo Chavez announces he can no longer sell us Venezuelan oil because his country's entire output is committed to China for the foreseeable future.