Tuesday, December 15, 2009

China Update

Good friend Mr. Tony Tsai, CEO – BHG Retail Innovation Institute and EVP Operations – The BJ Hualian Hypermarket Co. forwards valuable insights on China's approach and management of its ownership of USA debt and foreign exchange reserves, and how it is perceived globally.

Do we have a new leader that now begins to manage the economics of the globe?  Perhaps China has been one for a long while!

A horse may look like it is pulling the cart... but the one who holds the reins, reigns.

"How does China deal with the risk of holding US Treasury bonds?
"Convertible bonds" are not a solution for China in hedging the risk of holding US Treasury bonds. This could make things worse for China. Given the huge amount of foreign exchange reserves, what China should do is commit to adjusting its structure for economic growth, purchase strategic materials at the right time and persist in renminbi internationalization so as to ensure the security of China's investment in US Treasury bonds.

"World Bank believes China understands the risks of an asset-price bubble
Juan Jose Daboub, managing director of the World Bank, points out on Dec. 14 that the World Bank believes that Chinese authorities understand the risks of an asset-price bubble and will take the measures that they believe are more appropriate. They have done so in the past.

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