China has resorted to stealth intervention in the currency markets to amass US dollars, using indirect means to hold down the yuan and ease the pain for its struggling exporters as the global slowdown engulfs the economy.
A study by HSBC’s currency team in Asia has concluded that China’s central bank is in effect forcing commercial banks to build up large dollar reserves, using them as arms-length proxies in a renewed campaign of exchange rate intervention….
“China has used the pretext of reserve requirement hikes to help slow yuan appreciation. We estimate that the PBOC [central bank] intervened by about $49.6bn in June,” said Daniel Hui, the bank’s Asia strategist.
If anyone deludes themselves that the Chinese are up to anything but promotion of their own interests at the expense of the interests of others he or she is a fool. And, to be fair, I would say the same thing about U.S. policy since Nixon. I haven’t decided whom to vote for but I admire McCain’s comment during the Saddleback interview in which he said he wished our response to 9-11 had been something other than “go shopping.” McCain has rightly put his finger on the promotion of U.S. interests vs. founding ideals as the primary reason for our loss of credibility in the international arena. For this he deserves our respect, and potentially our vote. But, I digress. Beware of China. Beware of Russia. Beware of those who (like the current Bush) naively trust them. Vote for the candidate, at whatever level, who respects our ideals and is suspicious of our “national interest.” We do still have ideals, don’t we?
May the Chinese be better creditors than we deserve.