4 Signs that China is Moving Out of the Dollar → Washingtons Blog
4 Signs that China is Moving Out of the Dollar - Washingtons Blog

Tuesday, September 8, 2009

4 Signs that China is Moving Out of the Dollar

There are 4 recent signs that China is moving out of the dollar.

First, in June, China was a net seller of U.S. Treasury bonds (and shorter term notes) for the first time ever. As Mike Larson writes:

A few days ago, the U.S. Treasury Department revealed that China actually REDUCED its note and bond holdings by $25 billion in June. Although China did NOT sell shorter-term Treasury bills — and isn’t expected to — it’s still the largest amount of Treasuries China has ever sold in a single month.
Second, China will issue a non-Dollar denominated Renminbi bond sale on September 28th (6 Billion Renminbi worth).

Third, China has agreed to purchase $5o billion dollars worth of IMF bonds (denominated in the IMF Special Drawing Rights currency).

And fourth, the former vice-chairman of China's Politburo Standing Committee (the highest and most powerful decision-making body in China) - Cheng Siwei - recently said:

We will diversify incremental reserves into euros, yen, and other currencies. Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets.

As Edward Harrison correctly notes:

To be sure, there are other voices in Chinese officialdom that are striking a less alarmist tone. One cannot rely on the words of one Chinese official to represent policy makers in China. And Cheng never said the Chinese are now actively diversifying away from the U.S. dollar. Nevertheless, Chinese officials have been talking along this dollar bearish line for months now and I tend to believe their words will lead to action.

That is, at a minimum, bullish for Gold and bearish for the U.S. Dollar.


  1. "And Cheng never said the Chinese are now actively diversifying away from the U.S"

    DUH...If he DID say that there would be a stampede and the Chinese would get swallowed in the herd. Like many of us, they are trying to shuffle out the door without anybody noticing so as not to create and then get swallowed by a Tsunami.

    However a tipping point is fast approaching where they are diversified enough to safely "pull the plug". From all appearances they are very nearly there...and the death rattle of America WILL happen over as short a period as 24 hours...WHICH 24 hours is entirely up to THEM.

  2. Ahh.... BUT China did encourage their residents to buy gold and silver...even if they bought a little bit each...that wouild leave those holding 'paper gold' holding nothing but paper!!
    Went under the radar, BUT what an amazing manouvre!


→ Thank you for contributing to the conversation by commenting. We try to read all of the comments (but don't always have the time).

→ If you write a long comment, please use paragraph breaks. Otherwise, no one will read it. Many people still won't read it, so shorter is usually better (but it's your choice).

→ The following types of comments will be deleted if we happen to see them:

-- Comments that criticize any class of people as a whole, especially when based on an attribute they don't have control over

-- Comments that explicitly call for violence

→ Because we do not read all of the comments, I am not responsible for any unlawful or distasteful comments.