China is harping on a new theme: the status of the dollar as a reserve currency. China is calling for a new currency to replace the dollar as the world’s standard. Last Monday it was the central bank governor, Zhou Xiaochun, who made some proposal on a time everybody is preparing for the Group 20 gathering next week in London.
We read in the Financial Times:
China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.
The goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies,” Zhou Xiaochuan, governor of the People’s Bank of China, said in an essay posted in Chinese and English on the central bank’s website
Without any doubt we can connect this with something else.
From Reuters:
"A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar. Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket. Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform."
Don’t get fooled: China is slowly but surely shifting away from the dollar. In 2003 China had 83% of his foreign exchange reserves invested in US assets. This is reduced to 63%. While its net purchase of short-term Treasuries has jumped, the net purchase of all US assets has come down rather dramatically.
Something is changing. And it changes fast.
We read in the Financial Times:
China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.
The goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies,” Zhou Xiaochuan, governor of the People’s Bank of China, said in an essay posted in Chinese and English on the central bank’s website
Without any doubt we can connect this with something else.
From Reuters:
"A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar. Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket. Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform."
Don’t get fooled: China is slowly but surely shifting away from the dollar. In 2003 China had 83% of his foreign exchange reserves invested in US assets. This is reduced to 63%. While its net purchase of short-term Treasuries has jumped, the net purchase of all US assets has come down rather dramatically.
Something is changing. And it changes fast.
The Chinese Xinhua/china ETF is a little oversold on a daily basis.
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