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View Full Version : China says lending to US will not go on forever


Renegade
12-20-2008, 07:39 AM
Wed Dec 17, 2:38 am ET

BEIJING (AFP) China warned Wednesday it would not keep lending money to the US economy indefinitely, even as new data showed it had consolidated its position as the top buyer of American government bonds.

"China's increased purchase of US Treasury securities should not be interpreted as an endorsement of the assumption that the US can borrow its way out of the current financial crisis," the China Daily said in an editorial.

The warning from the state-run newspaper, an English-language daily that mainly addresses a foreign audience, came after the US Treasury Department reported a steep increase in Chinese holding of US Treasury bonds.

China held 652.9 billion dollars of US Treasury bonds at the end of October, up 11.2 percent from 587 billion dollars a month earlier, when China became the largest creditor ahead of Japan, according to the data released Tuesday.

Japan remained in second place, with total holdings of 585.5 billion dollars at the end of October.

The China Daily said that, given the global economic crisis , the consequences would be serious if China and other nations stopped channelling money into the US economy.

"Interest rates in the US would rise to undermine that government's efforts to bailout distressed financial institutions and companies," it said.

China was also constrained by a lack of other places to put its money, according to the paper.

"With few options to invest its increasing reserves safely and profitably, China may thus have to buy more US Treasury securities in spite of growing domestic skepticism that such purchases may incur huge losses later," it said.

However, as China and other nations help prop up the US economy, the United States should use the window of opportunity to undertake necessary reforms, the China Daily said.

"The current strong foreign appetite should not be taken by the US government as solid proof of the long-term value of its Treasury bonds," it said.

"Instead, it should race against time to undertake painful but critical reforms to revive its economy before such demand peaks any time soon."
http://news.yahoo.com/s/afp/20081217/bs_afp/financeeconomychinausbonds

gsgs
12-20-2008, 08:22 AM
> Instead, it should race against time to undertake painful but
> critical reforms to revive its economy before such demand peaks
> any time soon."

and if not, will China sell US-treasuries ?

what does Obama say ?
Don't they negotiate directly with each other ?

BirdGuano
12-20-2008, 12:21 PM
As soon as the Chinese consolidate their US bond position, I see a Taiwan acquisition on the near horizon.

gsgs
12-20-2008, 12:39 PM
one day China may buy Taiwan
(as special administration area like Hongkong or Shandong)

hillsidedigger
12-20-2008, 01:35 PM
There's a simple and painless way to immediately stop the necessity of federal borrowing (and solve a myriad of other problems)

and that is an additional $2/gallon federal gasoline tax (an additional $one/gallon state tax would balance the state budgets as well). Also, a $40 per barrel tariff on imported petroleum and petroleum products.

gsgs
12-20-2008, 01:42 PM
that also encourages to spare more on limited resources

BirdGuano
12-20-2008, 02:44 PM
There's a simple and painless way to immediately stop the necessity of federal borrowing (and solve a myriad of other problems)


I believe your idea of "painless" and my idea of "painless" do not exist in the same universe.

:D

Fiddlerdave
12-20-2008, 02:48 PM
From the Chinese, this is a very solid and clear warning of what is in the cards.

The power brokers are not going to listen to this. "China will not shoot itself in the foot", "they need us", all the arrogant talk of a failing power.

They will need to demonstrate. It will seem like TSHTF for a short time, and depending on the fragility of our system, it could be. But probably, they and their supporters will show up again and stop selling their bonds and start buying htem again, and it will quiet down.

Then our leaders better have learned that when they say "frog", we jump. If the Chinese have to do it a second time, that will be the Big One. Then your paper wealth, in all its various forms, will make fine insulation and fire starter.

Fattail
12-20-2008, 07:25 PM
The China Daily is the english speaking voice of the Chicoms. Certainly when they speak, we should listen.

CanadaSue
12-20-2008, 09:05 PM
That's a far from subtle warning from the Chinese.