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Why China slashed its US debt holdings (2)

By Liu Min, Wang Yu and Ren Feng (Jiefang Daily)

16:26, October 24, 2011

Buying U.S. Treasury securities: Still practical?

"Regarding the issue of dealing with U.S. Treasury securities, China is in a dilemma," Yuan said. "The rapid growth of China's foreign exchange reserves is making the world pay closer attention to China's trade situation and the currency value of the RMB and could lead to disputes easily. But China does not have better options to invest its foreign exchange reserves."

The growing risk from the uncertainty of the U.S. assets is making the diversification of China's foreign exchange reserves more urgent. Cheng said: "Chinese enterprises could participate in more direct investments in overseas markets and could also select high-quality foreign companies and buy their shares. However, that will be a long process and will not be accomplished in one stroke."

Some experts said that the Chinese government has been seeking to diversify its foreign exchange reserves in recent years, which is crucial to increasing the value of China's foreign exchange assets. However, if China wants to definitively change the overall situation, it must explore ways to drive its domestic economic development, reduce independence on foreign trade and reduce the growth rate and scale of foreign exchange reserves.

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Chinhomiah at 2011-10-31175.156.74.*
It is obvious that investing overseas has its risks, such as currency, economic, political and arbitrary. The American decision to take the easy way out by simply printing more money is a clear indication that the risks have now moved into the political and arbitrary realm. Instead of investing so much overseas, China should invest in its own stock markets and companies. It is conservatively estimated that within the next 15 to 20 years, China's economy will surpass that of America and, along with this, China's stock markets and bluechips will increase tremendously in market capitalisation and value. China's various investment arms should buy into quality companies within the limits permitted by law and stock market regulations. These state investment arms would then periodically distribute shares of these companies to the people of China. Imagine how happy the people will be when they receive Bank of China or Construction Bank shares once in every few years. The manner in which the people are to be allowed to convert their shares to cash, or whether they have to hold them for a certain length of time, is something that can be further discussed and fine-tuned. Slowly China will become a nation of shareholders, people with a stake in the system and appreciative of what the Chinese Communist Party is doing to improve their lives. Such a development would also be in keeping with the Marxian philosophy of making the people the true owners of the nation's wealth, rather than the current practice of only a few fortunate urban dwellers having the means of owning equity in public listed companies..
helen at 2011-10-25203.82.92.*
Why must China needs to explain its foreign reserves management? It's time to desist from such practices since China does not need to answer to its foreign debtors.China does not need to elucidate and apologise to anybody nor does Chinese leaders need to entertain discussions with foreign leaders and their media on the internal affairs of China. It shames us Chinese to see this habit continuing ....
Pan Asian at 2011-10-24220.255.2.*
The urgency of China to reduce its holdings on the greenbacks is of utmost priority. Uncle Sam, in fact is the guilty currency manipulator with rounds of quantitative easing.
  

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