Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: regli who wrote (52613)	6/20/2006 12:42:21 AM
From: RealMuLan	Read Replies (2) of 116555

>>How many dollars does China want to accumulate when they know they cannot actually use them for anything productive.<< China does NOT want to accumulate any clown bucks! it is those speculators who are gambling RMB appreciation are forcing China to accumulate! At least 1/3 (maybe higher) of China's foreign reserves are short-term foreign debt = hot money, they can turn on a dime and decide to go out. What if China has NO enough to meet the demand when those hot money want to withdraw? Do I need to tell you? Yes, it is highly inefficient for a poor country like China to have to keep that high amount of foreign reserves, but that is the result of the STUPID policy in the last 2-3 decades, especially since joining WTO. So China can only slowly undo the damage and play it safe. A currency crisis of 1997 style could bring the death to MILLIONS of Chinese!

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