China reveals big rise in gold reserves

From Financial Times:

China has quietly almost doubled its gold reserves to become the world’s fifth-biggest holder of the precious metal, it emerged on Friday, in a move that signals the revival of bullion after years of fading importance.

Gold rose to a three-week high of more than $910 an ounce after Hu Xiaolian, head of the secretive State Administration of Foreign Exchange, which manages the country’s $1,954bn in foreign exchange reserves, revealed China had 1,054 tonnes of gold, up from 600 tonnes in 2003.

Edward Harrison Guest Post at Naked Capitalism:

The Chinese want to weaken the U.S.'s power derived through its currency status. They have been setting the stage to do so for some time. However, they want to act in a way that benefits them in the short- and long-term. Cutting loose in an uncontrolled fashion now benefits no one with the world economy in dire straits. However, when the economy does right itself, you should see some major changes in the currency markets.

 

 

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Danger... danger... China.... China... the sky is falling!!!

Is China Threatening to Stop "Manipulating" Its Currency?

The NYT reports that China has been buying up fewer dollars in recent months to hold as reserves. It suggests that this may be due to growing concern about the potential loss in value on its dollar holdings. It is worth noting that China must buy up dollars in order to keep down the value of its currency against the dollar. China has maintained a managed exchange rate where the value of the yuan is below the market rate. This reduces the cost of China's imports to people in the United States. This managed exchange rate is exactly what the U.S. government has complained about for years as currency "manipulation." If China decided to stop buying up dollars for whatever reason, then it would mean that China's currency would rise against the dollar. Ostensibly, this is what U.S. government wants to see happen. It is not something that should provoke fear.

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China and the global recession

China’s economy hits the wall

There was a distinct whiff of triumphalism in Beijing in the weeks after the collapse of Lehman Brothers. Chinese officials speculated aloud about whether it would be wise to lend the Americans the money they needed to bail out their sinking banks. There was tut-tutting about American profligacy. The famous prediction by Goldman Sachs that the Chinese economy would be larger than that of the US by 2027 was revisited – perhaps it would happen even sooner than that?

But two months into the global financial crisis, things look much grimmer for China. In fact the only recent examples of social unrest in one of the world’s main economies have come there, not in the west. Laid-off workers in factories in southern China have staged protests that had to be contained by riot police. There have also been strikes and violent protests by taxi drivers in some cities across the country. The notion that the Chinese economy has so much momentum that it has “decoupled” from the US looks like a myth.