Beijing’s most difficult hurdle to overcome may be in presenting an alternative to the US Dollar and China’s own mixed image. The Euro is not a credible alternative, not yet that is, until it resolves its own structural as well as immediate problems on sovereign debt. (We will write more on this dynamism next). The Chinese currency, Yuan, may serve a limited purpose as a trade currency or “drawing right,” but most people are not confident in the transparency or independence of China’s monetary policy from its political agenda. (Certainly no more than the US Federal Reserve being independent of US political institutions).
The Chinese have pressed for an IMF alternative – “Special Drawing Rights.” However, most are also leery as it may be less bound by market conditions and more by political and thus potentially artificial considerations. The current floating currency system and market trading may be subject to some speculation and broad swings. Nonetheless, floating currencies have been embraced by most of the globe as the least imperfect and most closely reflective of relative valuations.
If anything, China is persistent. It wages a two front campaign. On one front as the United States’ largest creditor, it heralds that it “has the right to demand” of the US to put its fiscal house in order. China is concerned about a rapid deterioration in the value of the US Dollar, but it applies the criticism more to satisfy political rhetoric, and maybe as a way to retort to US critique of its own record; from human rights to copyright infringements to violative trade practices.
On the second front, China lobbies for an IMF reserve currency urging that it is necessary for the global economy in order “to avert a catastrophe” by overdependence on any single country.
It should be pointed out that China’s efforts to disarm the US Dollar from its global supremacy will cause China’s huge holdings of US denominated assets, particularly US Treasures, (estimated to be at over $2Trillion and growing), to erode in value. No matter: China has a longer-term policy objective to pursue and the downgrade of the US Government comes in too handy to be ignored.
Related ARTICLE – “China Loans to Greece, Influence in Europe” -http://www.filmannex.com/posts/blog_show_post/china-loans-to-greece-influence-in-europe-leveraging-economic-might-into-political-influence/30564
Related ARTICLE – (LAST) – “S&P Downgrades US Debt” - http://diplomaticallyincorrect.org/films/blog_post/sp-downgrades-us-debt-by-ambassador-mo/33202
More Related Reports at “International Financial Crisis Channel” - http://diplomaticallyincorrect.org/c/international-financial-crisis
By Ambassador Muhamed Sacirbey
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