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PBoC Governor Says Chinese Foreign Reserve Stockpile Is Excessive, As SAFE Issues Another Warning At US Treatment Of Creditors... And Dollars
One of the key news from the past week was that Chinese FX reserves passed a record $3 trillion for the first time, a surge of $200 billion in the first quarter alone. And with the bulk of that in dollar, it is not surprising that the recently collapse in the dollar has forced more posturing out of both the PBoC and SAFE (the State Administration of Foreign Exchange). In comments published Tuesday, Zhou Xiaochuan, governor of the People's Bank of China said that China's huge stockpile of foreign exchange
reserves have become excessive and the government
must diversify investments using the reserves. "Foreign exchange reserves have exceeded our
country's rational demand, and too much accumulation has caused
excessive liquidity in our markets, adding to the pressure of the
central bank's sterilization." That this is a not so subtle hint aimed at the dollar was confirmed earlier today by SAFE which said that the US government should take responsible measures
to protect the interests of investor. "U.S. Treasuries reflect the credit of the US government and are an important investment product for domestic and international institutional investors," the ministry said in a statement carried today on SAFE's website. "We hope the U.S. government takes responsible measures to protect investor interests." Alas, with the US administration solely focused on making confetti out of the US currency, we hope that China is not holding its breath too long. On the other hand, should the DXY take out its 2009 lows, all bets will surely be off and only another market collapse will be able to generate a potential flight to safety in the dollar. In the meantime, both gold and silver continue to benefit, and the only thing that appears to be able to drag down precious metals at this point is a wholesale margin call invoking cross asset liquidation.
From China Daily:
"The State Council has required a cut in excessive accumulation and good management of the funds accumulated, including diversification of investments," Zhou was quoted as telling a forum at Tsinghua University in Beijing.
To keep the yuan exchange rate stable in a capital account control system, the PBOC injects huge amounts of yuan into the banking system by buying foreign currencies from commercial banks.
The central bank then soaks up the excess yuan in the system via open-market operations and higher bank deposit reserve requirements. This is to prevent the money from flowing into the economy and fuelling inflation.
The newspaper did not quote Zhou as giving any details on the diversification of foreign exchange reserve use, although Chinese economists have urged the government to buy more assets in other currencies, such as euro and yen, as well as to invest in strategic goods such as oil and non-ferrous metals.
Commenting on other aspects of China's economy, Zhou was quoted as saying that the central government was considering letting local authorities issue municipal bonds for the first time as the main avenue for future financing of regional infrastructure construction. Local governments have so far relied mainly
on sales of land for such financing, supported by quasi-treasury bonds
issued by the central government on their behalf or special funds.
And from Market News:
The State Administration of Foreign Exchange cited a call from the Ministry of Foreign Affairs a day earlier which noted the recent move by Standard & Poor's to cut the outlook on the U.S. government's AAA rating to negative.
China is the largest holder of US Treasuries, officially totalling $1.15 trillion as at the end of February. Federal Reserve Chairman Ben Bernanke said earlier this year that China holds "at least" $2 trillion in U.S. government securities, once buying by third country nations is taken into account.
The People's Bank of China said last week that Chinese foreign exchange reserves rose $197.3 billion over the first quarter of this year to $3.04 trillion. PBOC Governor Zhou Xiaochuan said Monday that China has more reserves than necessary, and should cut the pace of accumulation.
At this point even the smallest hint that China's central bank is formally accumulating gold will likely be the spark that causes the next leg up in gold, to its inflation adjusted all time high of $2,400. Judging by the increasing posturing out of Chinese authorities this won't take long.
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Neither a borrow nor a lender be.
that is true I guess.
Damn you guys noticing some storms coming over your place.
I just Had a look at the FFT guys. And they are predicting a big set of tornados to come.
http://www.forecastfortomorrow.com/news/2011/04/tornado-season-look-out/
They have been VERY SPOT ON in the past...and say : "Expect it to be very bad over the next couple of days in the US mid-west, south and maybe even up toward the Canadian borders. At least one F-5 will come out of this, maybe more than one"
Stay safe people. MIght get rough.
And local weather has exactly WHAT to do with Chinese foreign reserves? Now we get the freaking weather channel here?
2009 low in DXY is so close you can almost touch it. Interesting to see when it will go through that. Guess it's not gonna take long.
In the meantime the serfs get poorer and hungrier whilst the speculators get richer and fatter
Oh yeah it's totally the fault of the evil speculators. It always is. As it was during the Greek hyperinflation, the Argentinian, the Hungarian, the German, the Russian, the Zimbabwean... It's never the fault of the government for running unsustainable deficits, or the central bank, all it does is print money. It's totally the evil speculators fault they actually use them.
yes I agree that it is the Genocidal ChairSatan's fault for not bothering to care about the consequences of his actions on the poor and old.. but he is sitting with the rest of the power mad leeches in their gated towers
... which, in turn, comes back to the government. Mad Benny wouldn't need to keep the printers on overdrive, if the budget was balanced. Not saying he's not complicit, as he quite obviously doesn't keep Fed policy politically independent.
Of course, that the government is really just a front for Wall Street is another key point in this systemically corrupt society of ours.
Fuck it, let them crash the system. Their own greed will be their own undoing. Compensation will find its way back to people who are actually worth a shit. Just wait, and be sure to have some purchasing power for when that time comes.
Hehehe.
Get em, escape key!
yeah.... the misses said the same thing that I should lose some weight...
Tim Geithner has a strong dollar policy.
"Tim Geithner has a strongly worded dollar policy."
There, I fixed it for ya!
Talk is cheap.
Dagong, bitchezzz!
Timmah can't influence them.
http://www.dagongcredit.com/dagongweb/english/index.php
How's that strong dollar policy working? AUD/USD: 1.066!
The word epic keeps coming to mind, just not sure where it will properly fit yet. The spx 30 year chart, gold or silver... so confusing.
must diversify investments
i heard that before. all governments lie. true as they understand the tailor and the baker always find a quicker way to balanced trade.
I'm diversified (Krugs, Maples, Eagles)
You forgot S & W, Kalishnikov, Ruger.
I want in on this party.
No clone army?
No way!
A fully diversified portfolio contains philharmonics)
Booyaa.
Suckersssss
INTC had its best quarter ever. I expect that this could be the catalyst that guns the stock pretty hard, especially since it is paying a dividend of 3.6%.
The widows and orphans sitting in money market accounts will be all over this....
Who gives a shit? Why the fuck are you posting this off topic bullshit in this thread? It's not important. Spam your own articles with this shit.
"I expect that this could be the catalyst that guns the stock pretty hard"
I wonder what your basis on this statement is. I see the above actions as potentially weakening the dollar, which would make all of the imported Chinese consumer electronics more expensive - and thus curbing demand for Intels semiconductors.
Intel NEVER goes up! In fact with the dollar dropping like a boat anchor, youre losing as usual.
Denninger hearing rumors that Ben is selling puts on GREEK debt!
so its the dollar....cause of todays GLOBAL RALLY .....i dont see a single index in red in marketwatch..........do they want me to think that all this rally is because of Intel
Wonder where all the guys were who were dissing me for getting back to a 100% fully invested position last week?
LOL.....
I'll "diss" everything you say, because you are still getting the shit beat out of you by inert lumps of metal. Your "full investment" probably isn't even beating the decline in the dollar, much less the returns from gold or silver.
You can only leverage paper.
Robot,
I realise this is a bit of a cheek, but as a percentage of the capital your programmers gave you to play with last week, what was your gross return?
Excuse me Mr. Gradient, your wankel is showing...
It's usually appropriate....
Robo once again hindsight investing....'100% fully invested since last week'? Gee I must have missed that particular proclamation last week Robo. Fully invested in what, new hip boots for dumpster diving?
So, if the Yuan is partially pegged to the USD, wouldn't them dropping a bunch of USD and USD denominated debt into the market also push their renminbi down too? Maybe this is their goal?
Since USD is also used as a relative measure of the "value" of PM's, this would also push up the "price" of PM's while they are buying.
Either way, it doesn't look good for the debtor when the owner of said debt makes noises like they have been. I wonder if Timmay and Bernanke will heed the warnings? I wonder if they are even empowered to act - given that they are pawns of the PD's....
Wait a mo'.
$3 Trillion is too much for a state the size China to have in foreign currency reserves and yet one US bank can have how much in derivatives on its book at what kind of leverage? The Chinese must be laughing and crying in equal measure at the West's stupidity.
Just shows what a screwed up world we live in.
Derivative notional value != net notional. All those ridiculous parrotted figures make me want to scream.
Look - in this clip, China says the same thing.
YouTube - The Day the Dollar Died
Warning - NIA Content.
YES MISTER CHINESE DUDE!
all that matters is your investment....
pinky swear that all decisions will be made accordingly...
Are these guys morons? I don't think there's a single person in the white house who gives a rats ass about China's interests.
Let's first start with PATENT LAWS BITCHEZ!!
This analysis is correct. Gold and silver are still cheap long term. Short term - you never really know if a storm may shake the tree. But long term the tree is planted in fertile ground and has a long way to grow up to the sky.
www.ObamaDollar.com
I'll get concerned when 3 things happen:
1) Worldwide debt starts a downtrend
2) Dollar stops losing value
3) Govts quit lieing
**not holding my breath
key point here: " both gold and silver continue to benefit, and the only thing that appears to be able to drag down precious metals at this point is a wholesale margin call invoking cross asset liquidation."
When does economic war turn into the real thing? Dangerous times we live in.
Suddenly at the drop of a hat.
I propose to ban hats.
IMHO economic wars are the real wars. The actual military conflicts involving bullets and men are just what happens when someone loses the economic war.
Just look at the economic conditions of the aggressors in the last few large military wars. Economic losers start wars.
As long as both sides have nukes, there will be no "real" war.
China Speeds Yuan Push - Change Would Make Currency More Attractive to Global Firms
20 April 2011, by Peter Stein and Shai Oster - Hong Kong (The Wall Street Journal)
http://www.vis-am.ch/uploads/allegati/Files/China%20speeds%20Yuan%20push.pdf
If I were China, I'd be getting out of dollars and Treasuries and into Gold and Silver. It must be evident to them (and they're not stupid, unlike Geithner, Bernanke and Obama - educated idiots, the three of them) that the USA has no intention or ability to be fiscally and monetarily responsible.
DavidC
I believe they are selling UST's, buying gold, all kind of under the radar its not exactly headlines news but theyve been doing it for quite a while.
China is sending signals and taking actions that seem to indicate they are willing to let the renminbi appreciate in value vs other currencies. may hurt exports some but will help imports(ex: raw materials needed) and help control inflation..
what would happen if they took their foot off the brakes some and allowed a big jump up say 7% instead of gradual controlled pegged increase?
My name is Tim Geethner (not Timmy or Timmay or Timmah) and the USSA will not lose it's AAA rating for a number of reasons. One because I said so, B because my handlers tell me so, Three because I have a cool perm hair-do my mom gave me and D because I'm mad.
They're so worried about the dollars value that they keep accumulating them....HILARIOUS!!!
What people don't understand is other countries want dollars, they want to save in dollars.
Wrong. China, Russia, India, and Brazil (creditor countries) are all dealing in their own currencies. The world has had quite enough of the dollar. It may be too late, it you are not already properly hedged.
"China, Russia, India, and Brazil (creditor countries) are all dealing in their own currencies."
Do you have the ability to chart USD vs. BRIC currencies? This would be a real eye-opener, I'm sure. Currencies backed by production and/or natural resources will trump one backed by promises across a wide range of market shaping forces (FX pairs, natural disasters, S&P downgrades).
I dunno but Brazil has been buying the USD at auction to try and slow the gain of the brazilian real
I guess that's why the dollar rallied after the S&P "negative outlook" yesterday.
(that's sarcasm)
They dont want dollars, but they wont allow trade to balance....therefore they must keep buying.
Fuck China. I have some PMs and renmimbi too. Go ahead let the latter appreciate, I dare you. China will turn into a war zone overnight.
Right.
They complain a.lot, but they secretly like it when ben fucks them up the azz.
Zhou Xiaochuan may need a diaper soon. Ben's Colace Punch is starting to grumble.
The wsj article says that since allowing the yuan to be traded freely in Hong Kong deposits of the renminbi have soared to CNY407 billion
Three trillion divided by one billion is $3000 per chinaperson right?
It sounds like a lot, but isnt really that much.
They can keep buying treasurys for a while.
Ahhhh... I love the sound of a putrid empire's death rattles in the morning!
Mas Max: Beyond Amerikkka BITCHEZ!!
I bet america is alive and kicking longer than you are!
Out of one UGLY pig and into a slightly less ugly PIIG.
Whatever you say about the Chinese, at least they supported our crack spending habit for awhile. Will another country step in to take up the slack? China certainly wasn't willing to purchase enough to pay for this rehab that's not working. That's where the Fed stepped in. Last I saw, the Fed had passed China as a lender to the U.S. With Americans feeling the true (not CPI lies) inflation in their lives, it is going to be harder for the Fed/Treasury/MSM to continue to say there is no inflation, and what is present is 'transitory.' A QE3 spells disaster for the consumer, and I am surprised that so much of the population is now figuring that out.
China concerned about debt??? Look, the banks are all STATE OWNED in China and they are carrying utterly massive losses on their books in all this real estate.
Who the fuck are they to talk about anything?
+1.
Looks like China will be added much more gold and gold miners to dump its dollars.
Great move!
I personally prefer Peter Schiff's response:
"Pay them back? Of course we're not going to pay the Chinese back their money. It's impossible. They know this."
"You know what are we going to tell the Chinese? We're going to say, 'You guys are predators, predatory lenders! We need a modification program, We need a cramdown on this. You never should have lent us all this money. You know we can't pay it back. It's not our fault.' The Chinese can't even vote in our elections. Why are we going to care what they think?! The U.S. government - we don't pay our bills. We're like Bernie Madoff. People loan us money. How do we pay it back? We borrow more. "
"It works until no one wants to lend us any more money, Then we're going to have to default, just like Bernie did. And there's only two ways we can default: we just legitimately don't pay, or we print money. That's it. There's only two ways to repudiate your debt. There's no way we're going to pay the debt."
http://www.youtube.com/watch?v=NkEtArDFNYA
"The Chinese can't even vote in our elections."... cough, Clinton, cough
Most of the products China exports to the U.S. are toxic, break easily, and only last a year or two. The Chinese are going to find out that the dollars we sent them have the same great qualities.
It's hard to imagine why Zhou would shoot himself in the foot like this. That remark just cost his government $Billions.
Commons sense would indicate that you get rid of the $Dollars before you go public with a statement like that.