Is this how they will end QE2?

S

spets1

New Member
from http://news.xinhuanet.com/english2010/china/2011-04/23/c_13842843.htm (chinese news website):
China's foreign exchange reserves increased ... to 3.04 trillion U.S. dollars by the end of March.

Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.
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Tang Shuangning, chairman of China Everbright Group (a state-owned enterprise operated under the supervision of the State Council of the People's Republic of China) said:

China should reduce its excessive foreign exchange reserves and further diversify its holdings.
The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars
He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health

Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement"
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First: This is a Huge announcement. As it comes from important people up there with Chinese banking etc. So they wouldn't say stuff like this for no reason.
Second: QE2 is almost finished. End of June 2011 (couple months away). US has so far officially said that they will end QE2 and no words about QE3. IT seems they are trying to tell MSM that QE3 is not going ahead.
Third: China comes out with this announcement! Huge! They want to dump US dollars. 2 Trillion of them. Dumping those moneys back, has the same effect as printing money, therefore no QE3 will be needed?

We will have to wait and see.
 
They might do some wordplay and go ahead with a 'continuation or extension of QE2' instead of launching QE3, MSM would gladly buy this wordplay as it is not used questioning stuff...
 
Second: QE2 is almost finished. End of June 2011 (couple months away). US has so far officially said that they will end QE2 and no words about QE3. IT seems they are trying to tell MSM that QE3 is not going ahead.
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Hasn't the US Govt been hinting (through back channels like MSM, FOX, WSJ ) that it wants to raise it's debt ceiling (from between 2-5 trillion)?

The Chinese may be sitting on a mountain of $US notes but for every dollar that came in they printed an even larger pile of yuan to maintain their economic advantage. A weak, watered-down currency that no one outside China really trusts, nor wants as a trade item...trading economies wil take the US petrodollar over chinese banknotes any day.

We must remember that the same economists that write these articles about an "emergent china" are the very same writters that have been blowing the RE and stockmarket bubbles, downtreading PM's and reporting on "how great the US economy is now doing since the end of the GFC in 2008", i.e. their accuracy to date ain't been that good.

Probably the biggest short-term economic problem that will come out of china is the end of the labour arbitrage and a rapid growth in the minimum wage (~$US1.95/hr circa 2010) to a real cost increase in the inherent labour costs of Chinese goods of between 25-40%
 
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