When someone shares with you something of value, you have an obligation to share it with others.
Monday 23 February 2009
Beijing has little choice but to keep investing in US Treasury bonds
Rumour has it that a list detailing the offshore bank deposits of mainland officials and their relatives is being compiled in the US for release if Beijing rethinks its purchases of US Treasury notes.
Beijing has little choice but to keep investing in US Treasury bonds
Wang Xiangwei 23 February 2009
With Beijing and Washington stressing that they are both in the same boat and rowing in the same direction, there is renewed hope that Sino-US relations are entering a new era of greater pragmatism and active co-operation.
To the bitter disappointment of activists at home and abroad, US Secretary of State Hillary Rodham Clinton made it clear that both countries would work more closely to tackle the global economic crisis and climate change, and that these challenges would take precedence over US disputes with China on human rights.
This should come as a relief to the Chinese leadership as it faces a year full of sensitive anniversaries, including the 20th anniversary of the crackdown on student protests in Tiananmen Square and the 50th anniversary of the failed Tibet uprising.
In a commentary on Saturday, Xinhua was quick to hail the start of a new era of realpolitik between China and the United States, a period of more comprehensive, closer, more mutually beneficial, and more strategic bilateral ties.
Washington’s approach partly reflects a shift in the context of Sino-US relations, one in which it used to hold more bargaining chips over Beijing and dictated the agenda.
The Global Times, a hawkish sister publication of the People’s Daily that trumpets the views of the nationalist movement on the mainland, quoted analysts as saying that the years of Washington setting the terms of bilateral ties were probably over, and it was time for China to voice its own demands more forcefully, since Washington had more favours to ask of Beijing.
One of those favours is a request for China to continue to invest in US Treasury bonds to finance the American economy, particularly as Washington tries to raise more debt to pay for its US$787 billion stimulus package.
It is an issue that has raised eyebrows not only in both countries but also elsewhere in the world.
With forex reserves of US$1.95 trillion, the mainland is the biggest holder of US government bonds and last year raised its holdings to a record US$696 billion.
However, China’s leadership is under growing pressure to diversify from its holdings of US Treasury bonds because of the falling value of the US dollar.
Domestic criticism against the central government over its American debt holdings has increased since US Treasury Secretary Timothy Geithner last month quoted US President Barack Obama as saying that China was a currency manipulator, lending credence to arguments in the United States that China’s undervalued yuan and high savings were partly to blame for the global economic crisis.
Since then, the Obama administration has backed down from that stance, but the comments left a bitter taste among many mainland officials and analysts.
During her two-day trip in Beijing, Mrs Clinton twice publicly urged China to continue to invest in US Treasury bonds, saying it was recognition of the two countries’ dependence on each other.
Chinese leaders have been circumspect about the issue. On Saturday, Foreign Minister Yang Jiechi echoed comments made by Premier Wen Jiabao in Europe that Beijing would decide how to invest its foreign exchange reserves based on the factors of safety, value, and liquidity.
Their careful comments may be designed to give Beijing more bargaining power in future trade talks with Washington and may be welcomed by the hawkish elements on the mainland.
But the reality is that Beijing will have little choice but to continue to invest in US government bonds, largely because there are no other viable and liquid assets available for its growing reserves.
And some mainland officials may have a personal interest in maintaining confidence in US Treasury bonds if the latest rumour in the corridors of power in Beijing is to be believed.
Rumour has it that a list detailing the offshore bank deposits of mainland officials and their relatives is being compiled in the US for release if Beijing rethinks its purchases of US Treasury notes.
1 comment:
Beijing has little choice but to keep investing in US Treasury bonds
Wang Xiangwei
23 February 2009
With Beijing and Washington stressing that they are both in the same boat and rowing in the same direction, there is renewed hope that Sino-US relations are entering a new era of greater pragmatism and active co-operation.
To the bitter disappointment of activists at home and abroad, US Secretary of State Hillary Rodham Clinton made it clear that both countries would work more closely to tackle the global economic crisis and climate change, and that these challenges would take precedence over US disputes with China on human rights.
This should come as a relief to the Chinese leadership as it faces a year full of sensitive anniversaries, including the 20th anniversary of the crackdown on student protests in Tiananmen Square and the 50th anniversary of the failed Tibet uprising.
In a commentary on Saturday, Xinhua was quick to hail the start of a new era of realpolitik between China and the United States, a period of more comprehensive, closer, more mutually beneficial, and more strategic bilateral ties.
Washington’s approach partly reflects a shift in the context of Sino-US relations, one in which it used to hold more bargaining chips over Beijing and dictated the agenda.
The Global Times, a hawkish sister publication of the People’s Daily that trumpets the views of the nationalist movement on the mainland, quoted analysts as saying that the years of Washington setting the terms of bilateral ties were probably over, and it was time for China to voice its own demands more forcefully, since Washington had more favours to ask of Beijing.
One of those favours is a request for China to continue to invest in US Treasury bonds to finance the American economy, particularly as Washington tries to raise more debt to pay for its US$787 billion stimulus package.
It is an issue that has raised eyebrows not only in both countries but also elsewhere in the world.
With forex reserves of US$1.95 trillion, the mainland is the biggest holder of US government bonds and last year raised its holdings to a record US$696 billion.
However, China’s leadership is under growing pressure to diversify from its holdings of US Treasury bonds because of the falling value of the US dollar.
Domestic criticism against the central government over its American debt holdings has increased since US Treasury Secretary Timothy Geithner last month quoted US President Barack Obama as saying that China was a currency manipulator, lending credence to arguments in the United States that China’s undervalued yuan and high savings were partly to blame for the global economic crisis.
Since then, the Obama administration has backed down from that stance, but the comments left a bitter taste among many mainland officials and analysts.
During her two-day trip in Beijing, Mrs Clinton twice publicly urged China to continue to invest in US Treasury bonds, saying it was recognition of the two countries’ dependence on each other.
Chinese leaders have been circumspect about the issue. On Saturday, Foreign Minister Yang Jiechi echoed comments made by Premier Wen Jiabao in Europe that Beijing would decide how to invest its foreign exchange reserves based on the factors of safety, value, and liquidity.
Their careful comments may be designed to give Beijing more bargaining power in future trade talks with Washington and may be welcomed by the hawkish elements on the mainland.
But the reality is that Beijing will have little choice but to continue to invest in US government bonds, largely because there are no other viable and liquid assets available for its growing reserves.
And some mainland officials may have a personal interest in maintaining confidence in US Treasury bonds if the latest rumour in the corridors of power in Beijing is to be believed.
Rumour has it that a list detailing the offshore bank deposits of mainland officials and their relatives is being compiled in the US for release if Beijing rethinks its purchases of US Treasury notes.
Post a Comment