PBOC Says No Longer in China’s Interest to Increase Reserves

[jakeXT]

Source: Bloomberg


The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.

“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.

China’s foreign-exchange reserves surged $166 billion in the third quarter to a record $3.66 trillion, more than triple those of any other country and bigger than the gross domestic product of Germany, Europe’s largest economy. The increase suggested money poured into the nation’s assets even as developing nations from Brazil to India saw an exit of capital because of concern the Federal Reserve will taper stimulus.

Yi, who is also head of the State Administration of Foreign Exchange, said in the speech that the yuan’s appreciation benefits more people in China than it hurts.

Read more: http://www.bloomberg.com/news/2013-11-20/pboc-says-no-longer-in-china-s-favor-to-boost-record-reserves.html

[leftyohiolib]

1. can some smart person decipher this and explain it's implications to u.s.

looks like they will continue to buy our debt

[zipplewrath]

2. Going to let their currency rise

It appears they are going to let their currency rise in value.

[leftyohiolib]

3. iirc they keeping the value artificially low

do you know how a rising value of their dollar will affect u.s.. will it make imports more expensive?

[zipplewrath]

4. You recall correctly

But I believe the point of the article is that they are going to be doing less of that. They are going to let the yuan rise (presuming market forces drive it there).

A rising currency in China would cause their exports to be more expensive. I suspect however that the magnitude of the rise will not be decisive in most purchasing decisions of their customers. Truth is, they are being hurt more right now by the cost of energy. The US is using so much domestic natural gas that industrial electric prices are down. In heavy industries, the cost of power can be the most decisive factor (even more so than labor).

[leftyohiolib]

5. thank u for taking the time to explain this