China moves away from dollar, toward minerals

[cyu]

Excerpts from http://www.asianews.it/index.php?l=en&art=15194&size=A

China is buying up increasing amounts of minerals in an attempt to circulate its currency and save itself from inflation linked to the dollar.

The State Reserves Office has also announced that China is accumulating enormous quantities of other minerals, - such as copper, nickel, zinc, aluminium, titanium,.. – in measures that far exceed industrial or commercial demand.

According to many experts these acquisitions represent Beijing’s attempts to diversify its portfolio, which still today depends largely on the US dollar. With the current economic crisis in the United States, China fears the dollar will drop and as a result Chinese wealth be reduced to nothing.

[FreeFocus]

Interesting move by China, but on a side note, doesn't China's holdings of US dollars give it a stake and interest in American imperialism? If the dollar drops, so does China; if the dollar is strong, of course backed up by American military power and threats, China makes advances.

[Dr Mindbender]

Interesting move by China, but on a side note, doesn't China's holdings of US dollars give it a stake and interest in American imperialism? If the dollar drops, so does China; if the dollar is strong, of course backed up by American military power and threats, China makes advances.

Indeed, which is worrying because one of the reasons Germany was hit so hard in the depression was because of its interests in the american economy. Seems to be the more invested the harder it hits you. We all know what that means, it allows public discontent paving the way for political change. It would be disastrous for any country, but especially a large superpower like China to turn fascist.

[KC]

Interesting move by China, but on a side note, doesn't China's holdings of US dollars give it a stake and interest in American imperialism? If the dollar drops, so does China; if the dollar is strong, of course backed up by American military power and threats, China makes advances.

Not really. China has loaned massive amounts of money to the US government and holds incredible amounts of US bonds as a consequence. Their interest in the United States economy in terms of these bonds is simply that the US economy doesn't collapse, or that the dollar doesn't basically devalue in the long term.

While I don't think this move is related to any worries about the collapse of the US economy, I think there is a very real danger that the US dollar will come out of this crisis "permanently" devalued. This diversification is an attempt to minimize the impact of such an event without opening up a trade war.


Indeed, which is worrying because one of the reasons Germany was hit so hard in the depression was because of its interests in the american economy.

The relation between Germany and the US is completely different than the relation between China and the US. In terms of this article, they are incomparable, as China is a major US debtholder. So it isn't really realistic to compare the two in this case.


We all know what that means, it allows public discontent paving the way for political change. It would be disastrous for any country, but especially a large superpower like China to turn fascist.

...

[cyu]

I would say moving out of the dollar makes your economy less vulnerable to bad decisions made by the US. China has indicated recently that it is worried about US plans for "quantitative easing".

If you are the world's largest holder of dollars, then starting to "sell off" your dollars is indeed going to be bad for you in the short term, since you have so much that it is going to affect market prices. However, in the long term, diversification is good insurance against random fluctuations in the value of any one part of your "portfolio" - since China has little direct control over US currency policy, they are basically "buying back" some of their sovereignty by selling off dollars.