Chinese President says the Era of Dollar is over.

Market Leader informed

In advance of the official visit of the Chinese President Hu Jintao to the US, scheduled for Jan 19th 2011, the US performed a massive info assault on China in terms of criticizing the Chinese monetary policy.

The main newsmaker appeared to be Timothy Geithner, Secretary of the US Treasury. Not long ago he blamed Beijing for its rejection to accelerate the revaluation of the Chinese Yuan. The undervalued Chinese currency, he says, is the main reason for the bilateral trade imbalance and growing inflation in China. American experts consider the unwillingness of China to revalue its national currency as the main barrier restraining the global economy from recovering from the crisis. Mr. Geithner’s speech arose numerous comments around the world (read the article called “Will the Chinese Yuan win the trade war?”).

China was quick to react. During the interview arranged by the well-known Wall Street Journal and Washington Post Hu Jintao, Chinese President, criticized the Fed Reserve’s QE2 program aimed at spending $600B to support the US economy despite its recovery. By such actions the US authorities try not only to restrain and lower the unemployment rate but also to support the US exporters, which will affect exports from other countries, Mr.Hu explained.

Hu Jintao, who is considered by Forbes the world’s most influential person, went beyond the scope of the Yuan problem when answering the questions asked by the American journalists. He is convinced that the epoch of the US Dollar as the world’s main currency is almost over, calling it a left-over from the past.  He confirmed that China’s monetary policy is aimed at making the Chinese Yuan a global currency. However the process is expected to take a long time. Beijing prefers to follow the path of evolution rather than revolution. Yet, the success in China’s economic development seen over the last 25 years confirms that the Chinese authorities follow the right path. China has already become one of the world’s economic leaders. That is why Beijing rejects the claims made by the US and Co to accelerate the revaluation of its national currency (Yuan).

China denies that its monetary policy restrains and slows down the pace of global economic recovery. China owns the world’s biggest gold-and-currency reserves. Out of $2.86 trillion about 30% of the sum is invested in American assets.  About 65% of China’s currency reserves are represented in US dollars. That is why China is interested in a stable US economy. In 2010 the People’s Bank of China (the central bank) was actively purchasing US dollars, increasing Chinas’ currency reserves by $450B.

China’s position at the international financial market is fairly active. China helps not only the US. Beijing is going to purchase a €6B share of Spanish bonds, trying to help Spain, which has a hard time maintaining its external debt. They say that China also shows interest in Portuguese bonds and is ready to spend €4-5B on them.

 

It is not the first time The US tries to put its financial problems on someone else’s shoulders. Previously Washington forced Tokyo to revalue the Japanese Yen by 50%.  However such measures proved to have no impact on the bilateral trade relations of the 2 countries. The Finance Minister of Brazil G. Mantega has recently announced that his ministry is currently developing a package of measures aimed against the growth of the Brazilian national currency as over the last 2 years it has gained 40% versus USD, which presses the export potential of Latin America’s biggest economy.

 

Masterforex-V Academy Experts note that the Yuan question is sure to be raised at the US-China summit as the world is waiting for the results of the meeting.

 

 

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