Forex Blog: Currency Trading News & Analysis.

November 13th 2006

China pushes reserve diversification

Every month, almost like clockwork, when China announces its new total of foreign exchange reserves, a cloud of paranoia descends on currency markets, as traders weigh the likelihood of China diversifying its reserves. This month was different, however, as this paranoia seems to have been born out by Zhou XiaoChuan, chairman of China’s Central Bank. He stated explicitly that China would *continue* to diversify its reserves, but did not specify particular currencies or investments that would be targeted. However, the consensus is that any diversification by China, regardless of the scope, would surely benefit the Euro.

“Plainly, there’s a lot of sensitivity on this issue, and as an investor, one has to respect the market’s reaction.”

Read More: China’s reserve plans keep forex market on edge

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Posted by Adam Kritzer | in Central Banks, Commentary, Euro | 1 Comment »

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One Review of “China pushes reserve diversification”

  1. Ramadurais Says:

    What China can do with US$ 2000 billion reserves?

    In reality nothing.

    There is a Hindu saying why goddess of wealth and God of protection is a pair. The reason being wealth needs protection and the protector needs wealth to keep self in a fit to protect.

    China has the wealth, un imaginable in the recorded history of human race. This china wealth is in real and hard cash. But China does not have the strength, military strength to decide how to spend the money china earned by hard work.

    China money can be visualized in a simple way that all whites (Anglo Saxons in particular) work for couple of years to repay the China money. During those years the Anglo Saxons cannot take any money home. Anglo Saxons will have to borrow to live for those years. From whom, from China only. In short Anglo Saxons has sold them to China for ever as long as present financial system is in place.

    There is no way China can realize the value of these US$ 2000 billion without taking all whites as slave labors for couple of generations. The slavery need not be the way blacks were to whites. It will be like Indians to British. British did all the dirty jobs for Indians, killing Muslims, chasing robbers, Creating jobs for Indians across the world in plantations, educating them , organizing their armies, etc. Now China is like Britain of 19th century, the question is USA is ready to be a British India to China.

    British in India offered what Indian’s lacked, that is the instinct to kill. British could go and kill many natives who resisted them and used Indian soldiers to settle safely in faraway lands. Most Indians returned home after the mission leaving British to have all the fruits of the Invasion.

    Twenty first century does not have lands to explore and conquer. Neither USA is ready to be a side kick to China man.

    How long China can keep the feeling I have the money, you better listen to me under control. The moment china starts flexing its muscle to show its money power, USA will create trouble. Fomenting trouble will cost only couple of million dollars to USA. USA will be ready to spend even 100s of million dollars to foment trouble in mainland china to avoid the pain of returning the money. USA has expertise, institutions to export treachery and revolutions.

    The strategy will be to create groups in the name of democracy. Next stage will be asking the rebels to form governments in exile. These governments in exile will demand the reserves as the legitimate ownership of government in exile. USA will write false accounts and ensure all the money is shown as spent in the freedom struggle. Saddam Hussein of IRAQ is an example where all his governments’ money got locked by west.

    The fall of Soviet Union and ruble as a currency of any importance is another example. Russians share the barbarian qualities with westerners and white Christians. There is no historical record that Chinese could act like barbarian to outsiders. China can fall faster than Soviet Union. Considering china does not have gas and oil like Soviet Union, the fall of china will be more painful and irretrievable for decades.

    In case china decides to buy the assets overseas with the money china has, maybe it can buy assets like Nigerian / Sudan oil fields at a fat price where in western countries could not operate against local Muslim terrorist / gangs / pirates. These investments will not be commercially right ones. Investment will be a way to park surplus cash.

    If china tries to buy any quality western asset against the wishes of western governments, that too strategic ones like ports, aircraft manufacturing companies, airlines, shipping, besides the loss of money the experience of the Russian oligarchs who all ended up in prison will be the fate which will await china man.

    So, china is now in a catch 22 situation, wherein they have the money but not the power, military power. US$ 2000 billion is such a huge amount of money that it can go only as a waste. Money will get wasted over a period of time.

    Only option available to china is now, to float a bank with Chinese name for international development, human development, and exchange stability. China should make either Beijing or shanghai as the financial capital of the world. China has got eight times more money than IMF. China should with a capital 500 billion dollar, start a bank which will fund only governments. China should buy out the liability of many governments and make these governments indebted to china, moving them away from west dominance.

    In the process, it should establish military bases across the world. With bases across the world and money in hand china will fulfill the basic qualification to be a super power.

    Now, the world is without a super power. USA has got military power, but no money. China has got money but no military power which can be deployed across the world. The probability of the USA emerging as a super power is not there. It is only an academic discussions and television statements that there is uni polar world. In fact, there is no polarity in the world and the world is drifting, without a leadership.

    China should step in as matter of urgency to prevent this world getting drifted with no decisive leadership. USA has been a military failure. USA is like a boxer who lasts for more rounds but finally getting knocked out.

    The strategy of USA to corner china with traditional competitors like Japan, India, and Australia and to some extent Russia is dangerous. Among big guys China has no real friends. China is alone in the world.

    China is not USA or Japan. China does not make premium priced products. China produces simple day to day needs needed by Billions of the people in the world. Take away the billion Europeans and USA. China has still five billion people as market for china products.

    So china should buy out the debts of all these poor countries using the billions china has and make these countries indebted to China. Funding these countries will also generate market for China products.

    This act of China wiping out the debts all poor countries will open up China as the greatest country built on as honest ethical super power against the gun boat diplomacy of Britain , Drone diplomacy of USA,.

    The time is running out. China need to this in a matter of 12 months. China should start running in the path to super power immediately.


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