China’s economy, foreign exchange reserves, currency, trade surplus problems

Here’s an interesting article that say China’s economy is the world’s problem. However, I just finished reading an article that reminds us it creats problems for China as well as for the rest of the world.

It is common knowledge that China buys dollars in order to keep the yaun artificially low, making exports more competitive. Keith Bradsher in the Tues. March 6 International Herald Tribune (Joong Ang Daily group) writes that investing these dollars in US securities (like treasury bonds) helps keep interest rates low for US mortgages and the like.

Bradsher goes on to say that Chinese citizens are unhappy to see the money invested abroad. They would rather see the money invest in say Chinese education. However that would mean selling dollars for Yaun and allowing their currency to appreciate against the dollar. China can’t do this because they want to keep their export businesses as strong as possible.

China may be getting ready to diversify, possibly mimicing Singapore’s Government Investment Corporation. What effect will this have on China and the world?

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