China Finally Diversifying Out of the Dollar? → Washingtons Blog
China Finally Diversifying Out of the Dollar? - Washingtons Blog

Thursday, March 12, 2009

China Finally Diversifying Out of the Dollar?

Everyone knows that China has $2 trillion in foreign reserves. Two-thirds of those reserves are said to be denominated in dollars.

But - after years of speculation - there are increasing signs that China is diversifying out of the dollar.

For example, the head of China's energy bureau said in comments published on Monday "China should use part of its nearly $2 trillion in foreign exchange reserves to buy more gold, oil, uranium and other strategic commodities".

And as Bloomberg writes today:

“We have lent a huge amount of money to the United States,” [Chinese premier] Wen said at a press briefing in Beijing today .... “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

China should seek to “fend off risks” as it diversifies its $1.95 trillion in foreign-exchange reserves and will safeguard its own interests, Wen said. Chinese investors held $696 billion of U.S. Treasuries as of Dec. 31, an increase of 46 percent from the prior year.

We have adopted a principle of diversification with our foreign-exchange investments,” said Wen. “So far, our holdings are generally safe. China will mainly use the reserves for outbound investments and trade.”

There it is, straight from the horses mouth. China appears to finally be diversifying out of the dollar.


  1. 28 co-sponsor Ron Paul’s bill to audit the Federal Reserve


  2. I fear the US is finally on the very edge of disaster. The rise in the stock market lately, has made people think that the worst is over, but it just means we're back on the status quo of getting more into debt. Even banks that have survived only due to bailouts from future tax earnings, are now off-shoring jobs to Asia, so where will all this tax revenue come from? Who will drive this consumer economy? Not the middle class, which is being gutted. Who then, because the rich refuse and hide behind Swiss banks etc?

  3. It will be a lot easy to pay back our dollar denominated debt to china if we inflate our currency. And all that inventory sitting on the banks books (aka a gazillion foreclosed homes) can be resold by the banks at new inflated prices – offsetting at least some bank debt denominated at the ‘old’ value of the dollar.

  4. Here in Western Australia, there are many instances where China is purchasing stakes in mainly mining companies. There is currently a deal which has been in place for a few years between the West Aust government and Japan, which is to build a new deep water port at Oakajee, near Geraldton, to allow export of minerals from the mid west region. China has come on the scene and is attempting to elbow out the Japanese in this deal, and buy a share (less than 50%) of the Oakajee port and rail project. With the downturn in iron ore exports lately, mining companies are very keen to accept Chinese money to keep their companies solvent. I will send some internet news items on this, if I can hunt them down.


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