China Retaliates Again, Accuses US Of "Out Of Control" Dollar Printing

Tyler Durden's picture

After taking heat from the White House for nearly a year for its currency peg, a fact that in itself will never get China to loosen its regime as it would be perceived as yielding to pressure from D.C., China has once again gone on the offensive, this time via its commerce minister who earlier today said that dollar issuance in the U.S. is "out of control" which in turn is leading to an inflation assault on China. Of course, one simple way to deal with said assault would be to revalue the currency, but why do so if the world's biggest export economy benefits from the stupidity of the Federal Reserve. After all, the Fed's China monetary policy allows the US to continue to export inflation and to provide cheap Chinese goods to America's great unwashed masses of Wal Mart shoppers who enjoy cheap (but increasingly more expensive) products. Plus it is not as if China is not printing trillion in money of its own, however in the form of what the US used to do in the past, and do so in the form of cheap, NINJA credit. All in all, this is just another instance of a pot calling a kettle black, even as nothing ever changes.Well, one thing may change: imminent bubbles in ever more rare earth minerals, and soon, rice and rubber, will soon add to pressure in all other already inflating commodities. How companies will be able to pass through these costs to consumers, nobody seems to have either any idea, or care. Certainly not the Fed, which is very myopically welcoming this price change.

Via Reuters:

 Chen Deming, speaking at a trade fair in southern China, said that exporters had done a good job of preparing themselves for exchange rate changes as well as rising labour costs, but were suddenly confronted with new challenges.

"Because the United States' issuance of dollars is out of control and international commodity prices are continuing to rise, China is being attacked by imported inflation. The uncertainties of this are causing firms big problems," Chen was quoted as saying by the official Xinhua news agency.

 Chinese officials have criticised U.S. monetary policy as being too loose before, but rarely in such explicit language.

At the G20 meeting in South Korea which ended on Saturday, Chinese Finance Minister Xie Xuren said that issuers of major reserve currencies -- code for the United States -- must follow responsible economic policies.

Along with posing an inflationary risk, a weak dollar also places appreciation pressure on China's yuan since its value is so closely tied to the U.S. currency.

And here is all one needs to know:

Despite his concern about the impact of U.S. monetary
policy, Chen gave a positive outlook for Chinese trade next
year. He said export growth would be stable, while imports would
increase strongly.

In other words, status quo preserved.

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ZeroPower's picture

Remove your fucking PEG to them and no problem!

More Critical Thinking Wanted's picture

Yep, the dollar-yuan peg, a'ka:

"The peg is China's guarantee that chinese workforce will always be cheaper than equivalent US workforce."

I expect the upcoming Republican/Palin administration to enshrine the peg in the US Constitution though, to guarantee the "strong dollar". (which, as we all know, is a good thing - except that it's bad.)

AnAnonymous's picture

"The peg is China's guarantee that chinese workforce will always be cheaper than equivalent US workforce."



Actually, the risk is nearly the opposite.

The peg is China's effort that chinese workforce might be one day as expensive as the equivalent US workforce. With all the consequences.

Removing the peg will keep China's workforce much cheaper than its US counterpart and likely to grow cheaper in the future.

China is no longer a low cost country. They have moved up the ladder.

Added to that, they are many other choices before the US workforce in the world.

SheepDog-One's picture

Nah its ALL GOOD man! Screw all the facts about how much we owe to China and can never repay, ever, even if things reversed and were pure total fiscal responsibility from here on out!

We're sitting at all time highs in markets, 80 P/E stocks are being chased higher daily, and the only thing to back it up is a bankrupt FED printing more baseless currency. ALL IS WELL! Jump in take the Nastee plunge we can only go higher from here nothing to worry about at all! We're in crazy Cocaine Crackland now where big hookahs full of Hopim are free for all!

midtowng's picture

China will eventually have to remove the peg. It's inevitable.

Plus, the only way America can ever revive our manufacturing base is if China removes its peg.

But China is a world unto itself. They are concerned with domestic matters first, last, and in-between.

King_of_simpletons's picture

Inflation is calculated differently here and in China. The hedonistic adjustments we perform here make CPI and PPI worthless. When China complains about Inflation they are talking about food price, gasoline, commodities etc... We simply choose to ignore all that and compute the price fluctuation of least commonly used commodity between two time periods and proclaim that there is no inflation all the while making chocolate wrappers and soup cans smaller and smaller.  

morph's picture

Yeah right.

You'd need the dollar to weaken 10000% before it'll be cheaper to hire an American. You realise workers who assemble iPhones earn $300 per month if they are lucky? That is only after pressure to give them wacking great pay rises.  It was more like ~$150/month a year ago.

Heavy's picture

Correct, we're all to be slaves, and to whom i wonder.

Jim in MN's picture

Effective talking point in currency war = priceless

Herd Redirection Committee's picture

Basically they just have to convince the people of China that they are 'trying to do something'.  It is the same trick that all politicians use.

We all know China and the US have decided a long time that they are going to do this together (currency devaluation), and now it is just a matter of trying to convince the people that it HASN'T been decided ages ago, and that the Chinese gov't is sensitive to its peoples demands.

If this has to end with China more like America, or America more like China,  I can tell you which one the leaders of BOTH countries decided on!  America, welcome to the 'developing' world!

We are starting a new ongoing series in regards to corruption, political favors and identifying the oligarchy over on PsychoNews, check it out:

Feedback and member contribution is welcome, as always

Cheesy Bastard's picture

Sun Tzu, bitchez

The Art of (currency) War. <; )



What_Me_Worry's picture

These two need to get a room and just f@ck each other already.

Oh wait, they already have.

Joe Davola's picture

Unfortunately, there seems to be quite a number of us caught up as the meat in that sandwich.

TheGreatPonzi's picture

Why does China continue to buy Tbonds?

bb5's picture

the question is how much longer will they keep buying and what happens when they stop? Can Zimbabwe Ben afford to buy them all?

Parth's picture

Great question. Japan too was once in the same boat. They catipulated and continued buying the bonds as they saw no option. So will the Chinese, I mean we give the Chinese too much credit (pun intended), but they foolishly walked into this crisis (everybody knew the home market would blow-at least the bankers knew the eventual blowup with derivatives etc) and I expect them to be as foolish in the future. About the only thing going for us is the rest of the world is no smarter than the Fed this G-20 notwithstanding. I think Germany is the only country who has the ballz to stand up to America. This will be hilarious as China et al enters "can't live with them can't live without" syndrome with USA.

AnAnonymous's picture

Why does China continue to buy Tbonds?



Easy to understand. The US has put up an extortion/farming scheme on the world scale. Monopoly is hard to define but the USD is probably the closest thing to a monopoly in present days.

As the US keeps selling the assets(mainly commodities) of others denominated in USD, anyone willing to buy commodities (and the Chinese are not willing to, they are obligated) have to get USD.

And you can get USD from only one pump: the US.

equity_momo's picture

Probably the best non-levered pairs trade for the next 2 years out there.

Heavy's picture


On a 2yr time line i think silver is better than gold if you can get in it.  I'm still running on the argument that the silver market is more likely see price increases than gold because of industrial demand spikes, supply limitations, and smaller total market value than the gold market (comex/spdr collapse and fort knox audit aside).  I'll point out that silver is much better as a hard currency should the dollar hyper-inflate and that it's more easily divisible into useful denominations/amounts, but that's more for fun than for significance of those factors' impact.  I'm not sure if there are differences in the mines' sales of furture amounts of pm, or how much it matters.

Both gold and silver are going up in value, I thought silver was the better of the two last time i checked.  Any reason to change my mind other than the ease of investing in some form of paper gold (even fully backed and redeamable)?  Cause I'll relinquish you that argument.

Oh regional Indian's picture

Wasn't Timmay just over there? He also got them to sing The Yuan will Be Upvalued, didn't he?

Pretty clear whose "jewels" are in whose hands though.



johngaltfla's picture

Uh, ummm, uh, ummm.....

You bitch when we don't print.

You bitch when we do.

You bitch when we send the Turbo Dwarf over there.

You bitch when we don't.

China, are you really my wife under a different name?

What_Me_Worry's picture

They talk us into taking on a ton of debt to buy things we don't need.

I think you are on to something.

NumberNone's picture

But look how much money we saved buying from their store on's like we were stealing from them! 

Dangertime's picture

Once the Chinese revalue the RMB, look for inflation pressure to suddenly appear in the US.


We have exported inflation to the Chinese....but in order for them to export it back to us, they need to revalue.


Checkmate my Chinese friends.

midtowng's picture

Good point. When, not if, China unpegs their currency, you better not be in cash. You better have plenty of gold, silver, and commodity producer stocks. Plus, you better have a way of getting your wealth out of the country.

Dangertime's picture

The neat trick is that we are forcing the Chinese to buy our Dollar OR to print RMB to keep the peg going.


They can have rampant inflation locally and face insurrection by printing to keep the peg, OR they can feed our debt addiction by purchasing US paper to keep the peg, OR they can drop the peg altogether and let the RMB rise in value.


Not many choices China.  They started by buying US paper and then got angry that we wouldn't stop printing it......I wonder how long they will stay with the current choice of printing the RMB as a way to keep the peg.


It's a game of Chicken, but they are on a Bike while the US has a Hum-V.  Sooner or later they will blink.

centerline's picture

Sounds about right to me. It's the collateral damage that sucks though.

BigJim's picture

I'm still learning about all this stuff, so I'd appreciate some comments on the following:

What's to stop the Chinese inflating their own money supply to keep the peg with the USD, but, rather than buying US Treasuries with the excess, buying commodities, mines, overseas farmland, gold, silver, copper, oil etc instead? Wouldn't that prevent the monetary inflation they're worrying about? And give them a lot of real wealth?

maddy10's picture

To where????????Mars?!!!!

AnAnonymous's picture

Actually, that is not that. Currently, one way out of potential social troubles in the West is to manage to get everything cheaper from the outside.

Outsourcing is the result of internal pressures and at start, was expected to benefit from a world tour of misery.

World tour of misery: install a factory in a very low quality general environment.

People work. The day they start to improve their general improvement, like adding running waters, it adds to the cost of hiring people them, workers come with bills asking for a pay rise. At this moment, tell people that you have understood them, that they are not interested in working for you. Say "see you soon when you are ready to work" (meaning gave up the option of having running water) Move the factory to another country. Wash. Rinse. Repeat.

The Chinese have blocked this pattern. They have absorbed a lot of the activity thrown outside the Western world and are no longer a low cost country.

Unpegging will not forcefully lead to inflation in the US as the world tour of misery will be put back on tracks.

Even though the difference might be absorbed by profits and not reported on consumers. Very likely. 

Dangertime's picture

It takes time to get those factories moved to lower cost countries.  A couple of years at the least.


In the meantime, releasing the peg will at the same time release the inflation genie from the bottle.  All of those Wal-Mart goods that are so cheap (but getting less cheap even with the peg kept)?  They will go up in price rather quickly.

AnAnonymous's picture

It takes time to get those factories moved to lower cost countries.  A couple of years at the least.


No. From a forthnight to a month.

This is happening on a frequent basis. And you probably never have noticed a disruption in the supply of the goods you are used to buy.




wiskeyrunner's picture

Another day of gains for stocks, looks like the midnight rally crew will be on hand tonight. Stock index futures rise overnight 90% of the time. Buy the close sell the open, make free money.

youngandhealthy's picture

Xie is right whether you like it or not.

What I don't say is that China is not a manipulator.

theXman's picture

China likes to say that it has the sovereign right to decide the RMB/USD exchange rate, it is no one else' business. By the same token, US also has the sovereign rightto print as much paper money as it wants, it is not China's business to complain. All China needs to do is to let Yuan appreciate and reflect the inflation wave back towards US.

The fact is that the RMB/USD peg has sucked US dry. It is no longer sustainable. It has to be broken off either by China voluntarily or by paper dollar attack launched by the Fed.

youngandhealthy's picture

Absolutely. US has the right to to whatever they want....however banking is built on trust and that includes the "uber-bank" itself, The FED.

tom's picture

Or (who could imagine such a possibility) the US could cut its fiscal deficit.

theXman's picture

Logically, yes. Politically, impossble, since that would require a massive self-imposed austerity program onto the population, a real 1930-style depression. Compared to that, debasing USD appears to be a less harsh alternative for the majority of the population of this country.

Got gold?

moofph's picture

...gee, those g20 commitments couldn't even last a few G-seconds.

Dr. No's picture

With so much printing by the FED and due to China's 8:1 peg, China is forced into a technological corner.  They do not have the abicus power to issue digital zeros as fast as the FED and are at a loss on how to inflate fast enough to keep the peg.

Dollar Bill Hiccup's picture

Oh man, you guys didn't buy those Rough Rice Inverse Floaters from GS? Bummer.

HarryWanger's picture

Codependency. They need us, we need them. Period.

All the talk is to make them look good and save face in front of the PTB. Like an old married couple bickering. That's all it is.

SheepDog-One's picture

'Out of control dollar printing'? NAH! Crazy Bennie and his Inkjets havent even gotten WARMED UP yet!

All the kooks are calling for markets rallies hard from DOW 11,200, nevermind thats far above an all time high based on valuations. HAS to go higher from here! All the bulltards say so, so all you 'traders' out there, full retard ON!

Parth's picture



Its not really a codependency, they just have no experience in dealing with such macro-economic issues. The American consumer is their drug and they od'd on the US dollar. Thats a hard habit to break, more than likely they will try to "work" with the US as the Chinese cannot envision a scenarion without US consumers. The US dollar was called "gold" in China- have you tried quitting cigarettes or drugs cold turkey?