2009/10/8 ss <cybers...@gmail.com> > On Wednesday 07 Oct 2009 2:04:21 pm Udhay Shankar N wrote: > > Indeed, China appears to be the most enthusiastic of > > all the financial powers involved, not least because of its enormous > > trade with the Middle East. > > What's in it for China? If China can't trade oil in US$ what will China do > with the $ 1 trillion its sitting on? In fact this is just the sort of news > that will make the dollar lose value isn't it? That will make China poorer. >
I don't know if there is anything "in it" for China or any other country other than having a surplus currency which is not tied to US monetary policy (like unrealistically low interest rates for some time now which fuelled the real estate bubble). It is also a good thing that the Yanks can't borrow money so easily what with their credo of "buy now, pay later". The problem that China faces is that with its $200 billion trade surplus with the US, and most of the foreign direct investment into China being in $, and the fact that it doesn't want to devalue its own currency means it has to keep buying $ to keep it at its current level. If the current trend continues, it will be sitting on 2 trillion dollars soon, and with all the money poured into stimulus packages would mean a significant downward pressure on the dollar and consequently their then 2 trillion would be worth much less. Kiran
