china gold connection, page-3

You mean like saying that they will keep buying US Treasuries but that they should also look to negotiate (in partnership with Russia, Japan, Kuwait, Saudi Arabia) with the US the transference of debt to stocks and gold in the future?

http://www.bloomberg.com/apps/news?pid=20601087&sid=awz3NJatMDzk
China Should Keep Buying U.S. Treasuries, PBOC Economist Says

By Bloomberg News

July 15 (Bloomberg) -- China should “moderately” increase its holdings of U.S. Treasuries and purchases this year should not be lower than the total for 2008, a People’s Bank of China economist wrote in the China Securities Journal today.

The holdings can be trimmed and purchases of other types of U.S. assets stepped up once the American economy recovers from a recession, Wang Yong, a professor at the central bank’s Zhengzhou-based training school, wrote in an article in the Xinhua News Agency-affiliated newspaper.

China and other nations with large dollar reserves should hold negotiations with the U.S. government on how those funds can be injected into the world’s largest economy, and those talks should include the possibility of shifting bond holdings into other assets such as stocks and gold, Wang wrote.

It’s “hard to say” whether cutting China’s holdings of U.S. Treasuries in a gradual manner will reduce the risks posed to the nation’s foreign-exchange reserves, the article said, noting that it may prove difficult to find sufficient buyers if the securities are dumped in large quantities over a short period of time.

China’s reserves, the world’s largest, increased a record $178 billion in the second quarter to $2.132 trillion, the central bank reported today on its Web site.

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I have used babel fish to translate the article - the word "beautiful" and "debt" seem at odds with one another but it is only a translation from babel:

http://paper.cs.com.cn/html/2009-07/15/content_15473.htm

http://au.babelfish.yahoo.com/translate_url?doit=done&tt=url&intl=1&fr=bf-home&trurl=http%3A%2F%2Fpaper.cs.com.cn%2Fhtml%2F2009-07%2F15%2Fcontent_15473.htm&lp=zt_en&btnTrUrl=Translate

Purchases the IMF bond should with to increase holds the beautiful national debt also to carry on
□ Wang Yong

　　□ Wang Yong

　　

　　On July 1, the International Monetary Fund (IMF) the council voting passed sends the debt to 186 member nations and Central Bank the plan frame, will distribute 150,000,000,000 US dollars by to withdraw money power (SDR) specially the fixed price the IMF bond. In its member nation, China, Brazil and Russia and so on expressed the enormous purchase interest, China's purchase goal will reach as high as 50,000,000,000 US dollars, then both's subscriber amount each is 10,000,000,000 US dollars. In mid-June, the data which the American Ministry of Finance announces demonstrated that China, Russia, Brazil and so on country have in April reduced the American national debt, as soon as this increases reduces, the existence is worth the place which pondered.

　　Purchases the IMF bond to want to enhance the influence

　　Since near section time, has had massive US dollar property China, Brazil in the foreign exchange reserve and so on emerging market country to appeal that should reduce US dollar achievement whole world reserve currency the status, establishes the new ultra sovereignty international reserves currency; At the same time, but should also enhance the emerging market country in IMF voting right and in other international financial institution influence, impels the establishment international finance new order positively.

　　Therefore, compares the developed country, the emerging market country to purchases the IMF bond the enthusiasm to be higher. , These country's foreign exchange reserve are quite at the same time many, and is seeking the foreign exchange reserve positively the multiplication. With US dollar depreciation risk, the IMF bond's security is comparatively speaking higher, but the IMF bond has also catered to before the SDR valuation “the gold brick four countries” proposed that substitutes US dollar achievement reserve currency with SDR the proposition. On the other hand, the emerging market country wants to strengthen oneself to the IMF influence, at present, since the share assignment and the reform are unable to realize, that these countries possibly want to become IMF first creditor.

　　But IMF agreed that sends the debt is also to a great extent to includes China's emerging market country request positive response, this had also reflected in the crisis, the emerging market country's obtained the certain extent promotion in world economics stage status and the words power. At the same time, this act is also helpful to further develops withdraws money the power specially the use scope, stepped out important one step in the reform developed country leadership's international currency pattern aspect. The above these, constituted national large amounts of money and so on China to purchase the IMF bond the important reason.

　　Reduces the beautiful debt to be for the purpose of dodging the risk

　　At present, along with the American quantification loose monetary policy's unceasing implementation, its stimulation economy's effect gradually is also appearing. But simultaneously, the international society in the future will depreciate to US dollar anticipated also along with it enhancement. Under such situation, takes the American national debt biggest holder China, without doubt will face a series of risks, most main will be trusts the risk and the depreciation risk.

　　From the trust risk's angle, all enterprises, because no matter the size, can lose the trust to US dollar to lose regarding the goods value makes the basic judgment ability. When if the world no longer believed that US dollar or no longer believed the American Ministry of Finance distributes bond time, this kind of risk will achieve in the extreme the situation, the people to the government, the financial organ, the trade policy and will rescue the city measure to be able to have many suspicions and discontented, this has caused the trust risk production. Trust risk enlargement, also direct or the indirect influence China's foreign exchange reserve income.

　　Certainly, what the people most worried is US dollar depreciation risk. The US to go out the financial crisis, has adopted weak trend US dollar policy, in March the US starts to implement the quantification loose monetary policy with all one's strength, pours into fluid 120,000,000 US dollars to the economy, this had decided in a short time, US dollar is at least impossible to be strong, particularly will depreciate unceasingly to the Renminbi. If does not reduce the American national debt, then the exchange rate depreciation or causes its property value to shrink largely. Perhaps the above these, are also countries and so on China reduce the American national debt the primary cause.

　　It is not suitable treats coldly the American national debt excessively

　　However, even if so, Chinese as well as other emerging market country while pursues holds IMF debt, also cannot treat coldly and reduce the American national debt excessively.

　　In fact, very much purchases the IMF bond, cannot strengthen a country in the IMF voting right. Because these two behaviors are not the same identicals, the former is creditor's rights, the latter mainly namely specially withdraws money the power decision by various countries' in IMF stockholder's rights. China other member nations purchases IMF with “the gold brick four countries” the bond, will not cause the voting right share increase. The IMF provide bond may enable the emerging economy to have more initiatives to choose the purchase, and determination purchase amount size, thus is advantageous to the foreign exchange reserve high developing country promotes it in the IMF status, its symbolic significance is bigger than the practical significance.

　　Looking from a more actual angle of view, reduces the American national debt to belong to the short-term behavior. First, the American national debt is takes the guarantee by The US government credit and the government income the degrees of comparison relatively high bond, carries on the investment to the American national debt is a China foreign exchange reserve investment utilization important component, comparatively speaking, regardless of the present and the future will be quite long in period of time, the American national debt will be one kind of unreplaceable good investment variety.

　　Next, China takes the American national debt biggest holder, if is massive reducing, needs to consider that in the short-term the international market does have that in a big way takes over a business the quantity; If is few reduces methodically, whether can achieve the circumvention risk, “the security wealth” the goal was also very difficult to say. Presently, China is affecting world many countries to the American national debt's manner to the American national debt choice. If China announced that reduces the American national debt, other country's holder has the possibility with the wind, but wants to purchase originally the country will perhaps stop the purchase. This kind reduces and undersells, definitely will cause the American national debt returns ratio to increase with recession in price; American national debt recession in price, also brings the very big book loss inevitably to China, moreover the anticipated future US national debt will also have the falling space, the book loss will further possibly expand.

　　Once more, if reduces the American national debt, thus urges the bond price to drop, interest rate level rise, also causes the capital cost rise, this will postpone US's economic resurgence. But the American economic resurgence postpones as well as US dollar depreciation causes to the foreign manufacture demand to reduce, exports the restoration which to China grows to be extremely disadvantageous.

　　Purchases the IMF bond simultaneously to increase holds the beautiful national debt

　　Therefore, the author believed that China in has in the American national debt question to need to have a more strategic ponder.

　　 Speaking of the present situation, we while purchase the IMF bond, should continue to increase moderately holds the American national debt. Makes in specifically the law, suggestion purchase certain amount IMF bond; At the same time, continues in this year to increase holds the American national debt, and quantity many in last year's level.

　　In addition, by China primarily, unites Russia, Japan, Kuwait, Saudi Arabia and Saudi Arabia and so on has the massive foreign exchange reserve country, the group carries on negotiates jointly, how studies together with The US government with discusses to pour into the capital to the American economy the method and the step, and bond class and so on national debt which has these countries US dollar property transform into properties and so on stock or gold.

　　After the American economic resurgence, China has the American national debt strategy to be possible to make the suitable adjustment - - for instance to be possible while to reduce the American national debt moderately, increases holds other properties. More importantly, may carry on the plan to the foreign exchange reserve investment, argues vigorously realizes the foreign exchange reserve investment multiplication and the strategy. (author is People's Bank of China Zhengzhou Training college professor)