China's SAFE Warns Excessive Dollar Holdings Risky, Promptly Retracts Statement

Tyler Durden's picture

For the nth time, China let loose that "excessive" holdings of US dollars are risky because "Washington could pursue a policy to weaken the dollar, a senior currency regulator said in comments published on a website that briefly pushed the dollar lower." Oddly this time, the statement which came from Guan Tao of China's State Administration of Foreign Exchange (SAFE) which is the entity responsible for managing the country's $3+ trillion in USD FX holdings, was promptly retracted, following an announcement by Tao to Reuters "that the comments had been made in private academic discussions and represented his personal view only." In other words this is an identical episode to the one when the BOC's Mark Carney told "a private circle" that the US is going to hell in a handbasket. While the announcement briefly pushed the dollar lower, is the take home message that everyone is secretly hating America, while in public keeping a rosy appearance? The answer, of course, is a resounding yes.

From China Daily:

"We must be alert to economic and political risks in excessive holdings of US dollar assets," said Guan, head of the international payment department at SAFE, in the article on the website of China Finance 40 Forum, a Beijing-based think tank of Chinese economists, bankers and officials.

"The United States has taken an expansionary fiscal and monetary policy to stimulate economic growth, and the United States may find it hard to resist the policy temptation of weakening the dollar abroad and pushing up inflation at home," he said.

The dollar, broadly lower on the day because of market concerns about the health of the US recovery, edged slightly lower after Guan's remarks. It hit a one-month low against a basket of currencies and the euro and a record low versus the Swiss franc.

Chinese officials have blamed ultra-loose US monetary policy for fuelling global inflation and asset bubbles but they tend to be less vocal about China's huge holdings of US assets for fear of roiling the currency market.

At times though, top Chinese officials, including Premier Wen Jiabao, have publicly called on the United States to ensure the safety of Chinese holdings of US assets.

The other part of the retracted message naturally involved the fate of the world's reserve currency. Not surprisingly, the push continues to be one of replacing the USD with the CNY:

Market conditions are favorable for China to forge ahead with market-based reforms of the yuan regime, Guan said, adding however that there is no basis for any sharp yuan rise. "Recent improvements in the current account balance, especially in the trade balance, have shown that there is no basis for the yuan to appreciate significantly," Guan wrote.

As such, the timing is good now for China to improve the yuan exchange rate formation mechanism, he said without elaborating.

"The market conditions for two-way movement of the yuan exchange rate are gradually coming into existence," Guan said.

The only question is when will China decide to finally go public with all these "academic" concerns... and not only go public but announce the long overdue JV with Russia and Germany on what the new "SDR" will be, now that the IMF has been lobbed into utter irrelevancy, and it is mostly China doing the backstopping of virtually every bankrupt European nation. We wonder how long before said backstopping crosses the Atlantic.

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Select your preferred way to display the comments and click "Save settings" to activate your changes.'s picture

ancient Chinese secret uhh........Calgone take me away.....

Fish Gone Bad's picture

The only things more two faced than China are banks.

writingsonthewall's picture


America is toast, EU is Toast and the rest of the world is warmed bread.

This is merely an opinion expressed in an academic discussion - it doesn't mean anything.


What this is, is the academics expressing what they have worked out - but the state suppressing it because the truth has so many consequences.

bigdumbnugly's picture

if their academics aren't any less out of touch than ours, suppressing their opinions probably saves them embarrassment later.


(and yes i know that an academic discussion doesn't necessarily mean it comes from academe - just sayin.) 

Ahmeexnal's picture

Why doesn't China force all it's exports be settled in Yuan?

Roaming Uranus Looking For Klingons's picture

That is easy.  Ever heard of Chinese Surprise?

kaiten's picture

... cause they are patient.

Oh regional Indian's picture

Petrodollars soaked up a loooot of excess dollars. In a demand inflationary period. And US controlled oil regimes.

In this period of deflating demand, how will all that Yuan be managed? China does nto control enough of the world yet and a lot of their "goods" are consumer discretionary crap. Not ready.


slow_roast's picture

The Communists are winning?  Shit.

luk427's picture

In China Bernanke and Giethner would have been executed by now.

writingsonthewall's picture

They're not communists - please read about Communism before making such statements.

carbonmutant's picture

Man who ride the Tiger cannot dismount - ancient Chinese proverb

dark pools of soros's picture

but woman that ride the Tiger can dismount, kick to the curb and take all she want  -  current golddigger winkwink

Roaming Uranus Looking For Klingons's picture

Man who give this proverb = idiot and baffoon.

Sit down punk -- try again another day.


Yen Cross's picture

 Keep up the good work1! Intended, sort of. You have some good ideas.



Bindar Dundat's picture

And when horse dies-- you dismount!

OldPhart's picture

NO, when the horse dies you do what the FED and Obama do.


Beat the living shit out of it until it moves.

Zero Debt's picture

"Whoever gets the money first, wins."

Ancient central banking proverb's picture

No the communist are losing (US) the Chinese are winning...

phungus_mungus's picture

Musical press releases.. KOOL!

Yen Cross's picture

   Thank goodness my MAMAS teet is dry.


      YEN! P.S. nice catch Tyler.


dark pools of soros's picture

boots on the ground in..... Yemen!!!   come on down!! 


TruthInSunshine's picture

God Bless the Chicoms, those cheeky bastards and exemplars of financial sanity, great loan provisioning, efficient allocation of resources and capital, and in general, just damned fine central planners!

I mean, we certainly have problems in the west, but WTF, China warning on the risk of holding U.S. fiat?

China, you are the pot and you iz black.

I will roll with Chanos all day, every day, when it comes to your investment grade, bitchez.

When you want to pick up your redeem your treasuries, make sure to bring tickie, bitchez.

No ticky no laundry
XRAYD's picture

Weaken the dollar?


How? When?

jmc8888's picture

ROFL, they know what's coming, but if they say it outloud they'll shoot themselves in the foot. But at the moment, and as ZH is pointing out they are trying to change this, but they have few alternatives without taking a loss.  If we screw them over enough, like the republicans, little default-like little pregnant, they could say screw it, and take a loss.

What we have here is fascism...either directly or through socialist mechanisms.  i.e. Socializing the losses in giving money to corporations or banks, which is banks/industry/gov't together constitutes fascism. 

So it doesn't really make much use to call it anything but wrong and a fraud.

...and how do you get rid of financial fraud leagally?  (and no what the republicans are doing is playing with fire and not legally wiping out fraud...and the difference is? well was there a stark difference between French Revolution and American Revolution....oh yes. just a difference like that.)

In China, most of wall street, and both parties, including tea, would be executed. Hell when china blows, we might see them do it anyways...or just hear whispers.

The scary thing is when russia and germany (attempt to) come together, is usually when London starts the wars.  Add in China, and I'm sure they're shitting bricks.  Will it change this time?


chump666's picture

The Chinese are embarrassing.  In the next 3 mths the EUR will be decimated and the USD bid.  That might as well hold...oh but the retracted statement, soon for a reprint in 6mths or so, I can respect that

chump666's picture

...the EUR and GBP about to be sold en masse

Stu's picture

Asian Alliance Supplants US Empire

While Official Washington grapples with how slowly to draw down troops in Afghanistan – and debates whether to complete the pullout from Iraq by year’s end – a new alliance of Asian states is expanding into the vacuum left by America’s decaying empire. By mid-June, the Shanghai Cooperation Organization may represent more than half the world’s people, Nicolas J S Davies writes.

By Nicolas J S Davies

June 7, 2011

On May 15, Russian Foreign Minister Sergei Lavrov announced that an important expansion of the Shanghai Cooperation Organization (SCO) will be on the agenda at its upcoming summit in Astana in Kazakhstan on June 15.

If the expansion is approved, India and Pakistan will join China, Russia and the Central Asian republics as full SCO members, and Afghanistan will join Iran and Mongolia as a new SCO “observer.” The U.S. media seem to have missed this news, but future historians will be unlikely to ignore it as an important turning point in the history of Afghanistan, the United States and the world.

TruthInSunshine's picture

Yep, that will end well.

Korea and Japan are in favor, and Russia and China don't have major, unresolved conflict over...oh...I don't know...things like ownership of oil reserves and other valuable natural resources.

zaknick's picture

As long as the KKK/Banksters Empire (which seems to be falling apart at the seams tee hee) is out there nations will set aside many a difference until they are no longer a mortal threat.

Just wait out the debt clock !

SCO=Humanity's last best hope

alexdg's picture

If they only knew if Ft Knox had any gold at all. If it were known to be empty or void of real physical gold, the game would flip in a second...

Habspurg's picture

Every financial shock event has to be preceded by un-announcements. Once we're fully desensitized to hearing PBOC insiders denounce the USD, and to news that the bank is dumping 98% of its US treasurys, etc., it will be time for the actual dump. The market overreaction will only be 20% instead of 40% thanks to our good friends at the PBOC/MSM.

AUD's picture

And some people say the international monetary is based on coercion rather than cooperation. And regards Mark Carney's statement, I wonder what 'assets' the Bank of Canada uses to match its liabilities?


Yen Cross's picture

 Don't fall into that chasm (AUD) You always junk me like a TRUE PIRATE!.



AUD's picture

I haven't junked you once

lolmao500's picture

Trust in the loonie. Because you can always trust a loonie... right?

GoinFawr's picture

Trust in the greenback. Because it is as good as gold... right?
(trust in any FIAT is loonie)

GoinFawr's picture

Mark Carney is doing his best to bolster the USD, judging by his actions and not his words.

Thorlyx's picture

Everything has its beauty but not everyone sees it.


sabra1's picture

Andrea Mitchell refuses to open her eyes! egad!

richard in norway's picture

Tonight<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Live from zurich


The fight of the centery


The dollar


The euro


Who will be
the undisputed heavyweight of global finance, and now your hosts bob and Steve


Steve- well bob it’s going to be an exciting night, the
dollar has been champion since taken the title from sterling right after WWII,
but after being champion for so long you wonder if he has any fight left in him

Bob- Steve that’s the question that a lot of folks
are asking, but I was talking to Ben Bernanke the dollar’s trainer and he was
saying that his guy was still hungry and would do whatever it takes to hang on
to this title

Steve- now bob, you know that trainers always want to
promote confidence but the dollar has put on a lot of QE recently, is he really
fighting fit?

Bob- yes I believe he is! What you gotta understand
is that this is a heavyweight contest and that extra QE will increase the
dollars punching power. When you look at the euro, he’s very underweight and
this is affecting his punching power, just look at his PIIGS they don’t look
very strong to me

Steve- well many people have been saying it, but not
surprisingly the euro trainer, jean-Claude trichet is convinced that this is a
fleeting problem and they have it under control

Bob- well we will find out soon Steve. Here come the
fighters out of their dressing rooms to thunderous applause, this is the title
fight we have all been waiting for and this fight is so important to so many,
this is not just about the title this is about the shape of the world economy

Steve- bob I think you’re getting overexcited there. But
here they are, and in the red, white and blue corner stands the dollar and he
is big, I mean massive, with over 100 trillion in dollar denominated assets and
the world’s deepest and most liquid markets. Frankly I’m speechless, there’s
only one way this fight can go

Bob- Steve it’s not like you to be speechless(laughs falsely)
the crowd is going wild as the euro steps into the ring and goes to the blue
corner with yellow stars and takes off his dressing gown, just look at those
core economies generating impressive growth and controlled inflation. This is
going to be a humdinger of a fight, the raw power of the dollar pitted against
the nimble footwork of the euro

Steve- as we wait for the first bell let me remind the
folks at home that the referee this evening will be credit Swiss, and he is the
only neutral here tonight!! Brazil and South Africa are displaying the 1st  round signs, and bob don’t they look lovely
tonight, brazil with her booming real estate market and SA with those gorgeous
gold mines, everyone wants to get a little capital into those two!

Bob-just remember Steve this is a family show, we’re
here for the blood and violence not any hanky panky with the BRICS. And there’s
the bell, the dollar lumbers out while the euro just stands there!! Steve what
is going on?

Steve- well it looks like the euro is having last minute
problems with Ireland but an emergency bailout by the jean-Claude the euro
trainer looks to have sorted it out, the euro turns around and walks straight into a Goldman sachs in the
PIIGS, and that’s gotta hurt, Goldman sachs has cooked the books in grecce and
the euro is hanging on the ropes

 Bob- well
we knew they had problems in that area, here comes the dollar to finish the job
with a knockout blow…..well I don’t believe it the euro ducked and weaved,
first default and then bail out and then default, the dollar has collapsed on
the floor in confusion

Steve- and that’s the problem with QE, too much
liquidity floating around makes you unsteady on your feet, if the euro
continues with this ducking and weaving it might make the dollar go wobbly in
the wall streets

Bob- I have to disagree, the dollar was surprised by
the sudden changes in direction but he won’t be caught out again, and he’s up
on his feet but gets slammed with a low blow in the muni’s and surely the euro
will get a warning from the referee for that

Steve- no warning from the ref, with hundreds of
municipal bonds on the verge of default and maybe as many as 20 states
tattering on the edge of bankruptcy including California, Michigan and Illinois
the ref feels that it was a fair blow, the dollar gets slowly to his feet and
then delivers an explosive standard and poor’s credit downgrade to Portugal,
and yet again going for that vulnerable PIIGS spot

Bob- but this time the euro just shrugs it off and
responds with a vicious forecloseuregate lawsuit

Steve- it looks like the dollar has got a cut in his
bank of America. Yes, you can see it now the equity is pouring onto the canvass
along with the millions of Americans losing their homes not to mention the 25%
with negative equity and the dollar must be praying for the bell to ring

Bob- not so fast Steve because the dollar fires off
yet another credit downgrade of Portugal this time from moody’s, and the euro is
on his knees holding his ECB which looks like it’s in serious danger of being

Steve- and the bell rings, both of the contenders return
to their corners to get patched up, and bob wasn’t that a thrilling round


Bob- it certainly was, they both managed to deliver heavy
blows, and let’s just listen in to the euro corner, are they going to keep with
the same tactics

Steve- well I’m not sure what’s going on here, it
sounds like the euro is having an argument with himself!!! Its complete chaos
in the blue and yellow stars corner as 15 points of view battle it out, but
jean-Claude throws a bucket of cold interest rate rises over the euro while
telling him to remain focused

Bob- I don’t see how the euro can win this fight if
he doesn’t know his own mind

Steve- but we saw in the first round that the euro’s indecision
wrong footed the dollar

Bob- check out the red white and blue corner Steve,
they are trying to apply a bailout to that bank of America cut and it does look
like they have stopped the flow of equity but it’s still seeping lots of foreclosures

Steve- Ben Bernanke has a QE injection ready, I can’t believe
this, but yes the dollar is going to get a shot of QE before round two, boos
and hisses from the crowd they defiantly feel that this is cheating, china and Thailand
are appealing to the ref but to no avail.

Bob- well Steve there is nothing in the rules against
QE though many spectators believe there should be and look at the dirty looks
that Brazil is sending the dollar now

Steve- well I’m not surprised, no one wants to catch
bubbles, the girls are holding up the signs for round two…….

Bob-the dollar is feeling frisky after that QE
injection and tries a carry trade on Brazil, she doesn’t like it and imposes
capital controls, that’s one wounded male ego

Steve- yes indeed, but check this, as brazil gets down
from the canvass, sterling is there asking for her phone number but just gets a
middle finger for his troubles

Bob- that told him, QE injections work for some but it
just makes sterling look cheap without filling in any of the wrinkles. And the
bell rings, the dollar starts strongly puffed up with lots of QE confidence and
throws a moody’s, flitch, and s&p credit downgrade combination at Ireland.
The euro is hurt, jobs gushing out everywhere, the ref steps in but jean-Claude
is there with yet another emergency bailout

Steve- the ref is doing the standing count 7, 8, 9, and
the euro launches himself against the dollar with a debt ceiling impasse and a
shock increase in US unemployment, the dollar counters with a possible Belgian
bank collapse

Bob- this is a good exchange lots of bad economic
data blows on both sides, oh no! Out of nowhere the dollar lands a Spanish
bonds crisis and the euro is lying on the floor gasping for breath

Steve- this looks bad for the euro, but wait what’s
this. China has entered the ring and is buying Spanish bonds

Bob- and delivers a stop the QE bullshit or we will
stop buying your debt flying kick in the treasury bonds, ohh ahh cantona

Steve- wrong sport bob, although cantona did try to
crash the world finance system by fronting an internet campaign telling folk to
withdraw their money from banks

Bob- I didn’t know that. The ref is having problems
getting china out of the ring, Japan is trying to help out, of course Japan is
the second largest holder of treasury bonds. And china is out of the ring, loud
applause from the emerging markets, that QE shot really got them riled

Steve- I remember when emerging markets kept their mouths
shut and did as they were told and never objected to a hyperinflationary capital

Bob- well those days are gone. And the fight is
underway again, the euro lands a nasty magazine article in rolling stone about Goldman
sachs followed up with an investigation by a congressional committee, but its easily
parried, the dollar is still landing the credit downgrades but they are not as
effective as before

Steve- oh my! The euro just floored the dollar with an
Iranian plan to begin pricing oil in Euros

Bob- you remember Steve that when sadddam had the
same plan it took an invasion to stop him, but the US is overextended now so
that option is off the table

Steve- the count has got to 8 and the dollar is on his
feet and lashes out with a moody’s “any restructuring of Greek debt is default”
body blow and follows up with mass protests in PIIG countries and election
defeats in Germany

Bob- well this is a surprise the euro responds with
forcing the Greeks out of the euro and triggering the credit default swaps,
this is suicide!!

Steve- bob we couldn’t have expected this outcome the
euro is disintegrating before our eyes, bits falling off everywhere while the
credit default swaps have collapsed banks across Europe and the states, the
dollar has been punctured and is deflating at light speed as the QE disappears
in the collapse of the derivatives markets

Bob- and the Swiss referee is out for the count, he
got hit by one of those CDS’s and received a nasty head wound, but what a
fight! What a fight!!


Steve- but who won, the euro has fallen to pieces and
the dollar has disappeared in a deflationary implosion

Bob- here come the judges now, they are shaking their
heads, there seems to be disagreement between them

Steve- the judges are Russia India and the Middle East

Bob- and the decision is gold. Gold!! Is the winner

Steve- no it’s not its oil. Oil!! Is the winner

Bob- and the crowd are not happy with this result;
it’s turning into a free for all. Steve, I think we better get out of here,

Steve- join us next week folks as hyperinflation takes
on hyper deflation in the battle of the apocalypses, good night and take care….
wait for me!!




Oh regional Indian's picture

Long but BRILLIANT! Original work?


richard in norway's picture

yes, my own work


i was asked to do a article for a politics blog, and this what i came up with. i thought it would amuse zerohedgers but i see i got junked, maybe for being too long

Ben Dover's picture

Bravo, Richard.

As for junking, who doesn't get junked here? And you only got one - that's pretty much a positive.

rwe2late's picture

+++ for the article Richard

( Too long?? - only for those with attention span deficiency

reminds me of the Amadeus movie when Mozart had his music criticized for having "too many notes".)

OldPhart's picture

Kudos!!  The best description of the dollar/euro battle I've read and it's funny!  Shared this on facebook as


Monedas's picture

We've milked that dollar and have taken the world on a merry little ride for 100 years ! What are you going to do with all those dollars China ? Wallpaper the "Great Wall" ? Monedas 2011 Stay tuned Socialist Scum

css1971's picture

Why would China care very much about the dollars they got?

They got all the manufacturing and jobs... i.e. all the real stuff.

I'm sure that once they see the debtors can't pay any more, they'll let you have all the dollars back for free.

Monedas's picture

It's been fun putting over this Ponzi scheme on a naive Socialist World ! They busted their buns for a fistful of dollars ! What are they going to do....throw us in jail with Bernie Madoff ? They'll need to convert those dollars to Gold....when no one's watchin' ! That's why they "promptly" retracted the worrisome statement ! Monedas 2011 Were all goin' down !