The New York Times today both informs and misleads on China’s role in the American economy. The Times headline warns, “China Slows Purchases of U.S. and Other Bonds.” That may well be true, but it isn’t supported in the story that follows. The story actually cites slower growth in the PRC’s holdings of foreign currency, including dollars. China’s reserves fell $33 billion in January, before rebounding strongly in March. That’s an interesting development but it doesn’t bear directly on the U.S. As an illustration, the PRC’s holdings of Treasuries climbed …
Initial Chinese reaction to the launch of North Korea’s missile, in clear violation of UN Security Council Resolutions, is true to form. They will go along with international consensus just as far as they need to in order to blunt it. Last time around, in 2006, the PRC played the familiar role of North Korean patron state, even as they expressed concern over its missile launch and nuke test. It is precisely because the Chinese blocked action in the Security Council that would have permitted enforcement that we are back …
The G-20 summit communiqué has been released. As we predicted, it has something for everyone, though rather more for the Europeans than the Americans, and even less for the Chinese. And there are constructive points in it, though whether they will amount to much remains to be seen. But by and large, the communiqué marks a large step in the wrong direction for the U.S. and the world. First, the summit has agreed to treble the resources of the IMF to $750 billion, to support $100 billion in funding for …
A paper by Chinese central bank chief Zhou Xiaochuan — arguing the world should move off the dollar system — has attracted much attention. Like so many economic stories involving the PRC, there is less here than meets the eye. It is hardly a new thought. Beijing has wistfully imagined for almost a decade a future where the dollar has been replaced, most prominently when it claimed (falsely) to have decoupled from the dollar in July 2005. There are gigantic practical problems Zhou is well aware of. Any sudden move …
Earlier this week, Russia issued a radical call for the eventual replacement of the dollar as an international reserve currency, and its replacement by a new, fiat currency to be created by a global regulator. The prospects for agreement on this at the G-20 summit in April, to put it politely, did not look promising. But now another voice has been heard from: China. And their reaction has been surprising. With their vast holdings in dollar-denominated securities, you would think they would oppose anything that would weaken the dollar. But …
The Washington Post reports today: Li Gao, China’s top climate negotiator, said any fair international agreement to curb the gases blamed for global warming would not require China to reduce emissions caused by goods manufactured to meet demand elsewhere. The idea that China would ever make cuts in carbon emissions a priority has always been a fable. Heritage fellow Derek Scissors explains why: Behind Chinese policies on competitiveness –indeed behind almost everything involving the PRC–is the Communist Party’s top priority for 20 years and counting: jobs. The well-documented demographic surge …
This Saturday the Washington Post reported: Exerting its new influence as the U.S. government’s largest creditor, China yesterday demanded that the Obama administration “guarantee the safety” of its $1 trillion in American bonds as Washington goes further into debt to combat the economic crisis. … China surpassed Japan last year as the largest foreign holder of Treasury bonds. Any indication that it intends to cease those purchases — or, worse, stage a sell-off — could drive up the cost of borrowing for the U.S. government, as well as send mortgage …
Speaking at his annual press conference, Chinese Premier Wen Jiabao expressed concern about the outlook for U.S. government debt: “We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried. I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.” China does hold $1.946 trillion in foreign-exchange reserves, two-thirds of which is believed to be held …
Two weeks ago the Obama Administration celebrated the first successful U.S.-China military-to-military talks of the new administration. Then this past Sunday, they found out relations with China were not always going to be so easy. Five Chinese ships harassed the USNS Impeccable in international waters off the cost of Hainan Island forcing it take emergency defensive maneuvers. In the New York Post Heritage senior analyst Peter Brookes places the incident in context: Beijing claims Impeccable was violating its sovereignty by conducting operations within China’s 200-mile Exclusive Economic Zone (EEZ) as …
Chinese trade minister Chen Deming’s op-ed in the Wall Street Journal today chides the rest of the world on turning toward protectionism. This is remarkable on two counts: (i) that the PRC should lecture any country on protectionism and (ii) that the US has opened itself to being lectured by China. China intervenes in markets to distort trade as much or more than any country. While global consumption is shrinking, the PRC is forcing proportionally more of its goods on everyone else. That’s why China’s trade surplus over the past …
