China ratchets up the pressure on Obama’s borrowing plans
China is carefully ratcheting up the pressure on the Obama administration to curb its reckless spending and borrowing plans. It proposes that the US government issue bonds in China’s currency in order to protect China from the serious devaluation of the dollar that the administration apparently intends in order to pay for its profligacy. Telegraph:
The head of China’s second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars…Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), also said…”I think the US government and the World Bank can consider the issuing of renminbi bonds,” he said, asking for a “mutual cooperation” between the US and China…
Two months ago, before the G20 meeting in London, Zhou Xiaochuan, the head of the People’s Bank of China, the central bank, published a personal paper proposing to replace the dollar as the international reserve currency. His call came after Wen Jiabao, the Chinese premier, asked the US to guarantee the safety of China’s huge pile of US debt.
You have to admire the subtlety of China’s approach. In one case a banker wrote a “personal paper” about getting the world to dump the dollar as the leading reserve currency. In another it was the “second-largest bank” that proposed the renminbi bonds. On the other hand, the Chinese are not always so subtle — like when they mocked and laughed at Tim Geithner’s empty assurances about how safe it was to invest in US government securities.