Re: USD falling on news of printing, the Asians might just continue to grin and bear it for another round. To do anything different is to shoot themselves in the foot.
You're thinking like a trader trying to protect your assets -- I'm not so sure that's the appropriate template for this situation, which for China has extremely long term goals.
Looking backward, only the Chinese know for sure whether they are satisfied with the overall results of their 'vendor financing program' with the US over the past 5-10 years that has resulted in the accumulation of all these US-denominated treasuries, and continues to this day.
Perhaps China views the currency hit after the fact as the equivalent of an amortized discount-on-sales attributable to the original transaction, i.e. they have always known that they will never realize full stated value, but it's better than making no sale at all. As for the Old Maid cards they've accepted in the meantime, they'll worry about how to get rid of those later.
Considering all the Chinese domestic growth that this vendor financing scheme has facilitated, for all we know they might even feel like they're way ahead of the game, even with depreciated holdings -- it depends on what they expected to come away with in the first place -- after all, only the US could have facilitated the Chinese growth we've witnessed, and while that's not as true as it once was, on balance that premise still holds today.
On a geopolitical level I also have to believe that China is not too crazy about the re-birth of Russia as a world power on their side of the planet. Although those two would make formidable allies, there's a lot of history in the way of that happening -- so quite aside from the financial considerations of the USD woes, it really isn't in China's self-interest to torpedo the US in the pocketbook just yet |
