China Diversifying 1 Trillion USD Worth of Currency Reserves

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ByLoSellHi

China's Diversification Won't Hurt Dollar, Wen Says (Update1)

By Christina Soon and Yanping Li

http://www.bloomberg.com/apps/news?pid=20601087&sid=aV5vnes3kRso&refer=home

March 16 (Bloomberg) -- China's Prime Minister Wen Jiabao said the setting up of a new state organization to diversify investment of the nation's $1.07 trillion currency reserves won't hurt the value of U.S. securities.

``Our purchases of U.S. dollar assets are mutually beneficial and the setting up of the new agency won't affect the value of the U.S. dollar assets,'' Wen said at a televised press conference during the annual meeting of the Chinese legislature in Beijing.

China, the second-largest holder of U.S. government bonds, lifted its holdings of Treasuries by $4 billion to $353.6 billion in January as a record trade surplus swells foreign exchange reserves. A lack of experienced fund managers and a slump in global emerging market debt may delay any shift from the safety of U.S. debt.

``Holding Treasuries, one of the most liquid assets, is the better option, especially given that the current environment is very volatile,'' Steven Chang, global markets vice president at State Street Bank & Trust Co., a unit of the world's biggest provider of investment services to institutions, said before the press conference. ``I'm not sure why they should be unwinding that much that quickly.''

The government plans to set up an agency to manage its reserves that will seek higher returns and invest in companies in a similar way to Singapore's Temasek Holdings Pte., Finance Minister Jin Renqing said on March 9.

``China's overseas investment experience is fairly short,'' Wen said today. ``China's outbound investment is tiny as compared to developed countries.''
 
Quote from xeelee:

Looks like the end is near... I need to start buying gold. :D
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i dont think the bankers will allow gold to rise much, but yeah the $ is utterly fucked...and by design. buy long dated $puts u'll be protecting your wealth.
 
China's Premier Says Plans to Diversify Reserves Won't Affect U.S. Dollar

Posted on Mar 16th, 2007

http://china.seekingalpha.com/article/29772

PM Wen Jiabao tried to allay concerns about China's plans to allow a new agency to manage a portion of its more than $1 trillion in foreign reserves at a press conference today in Beijing.

"Our purchases of U.S. dollar assets are mutually beneficial," and the formation of a new agency "won't affect the value of the U.S. dollar assets," said Wen.

He added that the agency is tasked with "preserving and increasing the value of foreign exchange reserves" and said increasing the "safety" of holding is important given China's inexperience in overseas investing.

A Credit Suisse analyst in Singapore commented, "We're looking at very small amount of money going into the equity markets until they build up the expertise to manage these holdings."

An analyst at China's Construction Bank acknowledged "the most immediate problem is the lack of talent" with global investment management experience.

PM Wen also spoke about the need to raise direct overseas investments as China lags far behind other economies its size.
 
Quote from Bitstream:

i dont think the bankers will allow gold to rise much, but yeah the $ is utterly fucked...and by design. buy long dated $puts u'll be protecting your wealth.
More...

Could you explain a little further please? Are they like normal securities options? What is the symbol?
 
Quote from FourZebra:

Could you explain a little further please? Are they like normal securities options? What is the symbol?
More...


currencies futures options traded @globex.
 
AP
China to Raise Key Interest Rate
Saturday March 17, 7:06 am ET
China's Central Bank Announces 0.27 Percentage Point Increase in Key Interest Rates
BEIJING (AP) -- China's central bank said Saturday it will raise key interest rates by more than a quarter percentage point in a move to cool torrid economic growth.
The 0.27 percentage point hike in one-year deposit and lending benchmark rates will go into effect Sunday, the People's Bank of China said.
That would raise lending rates to 6.39 percent and deposit rates to 2.79 percent, the bank said in a statement on its Web site.

The new rates will "promote the good, fast development of the national economy" by guiding an increase in credit and investment, preserving price stability and steady operation of the financial system, the statement said.
The rate hike, the fourth in 12 months, is the latest in a series of measures China's leaders have taken to slow an economy they fear is running at an unsustainable pace. Four years of double-digit economic growth, largely driven by investment and exports, have left the financial system flush with cash.
 
Seems as though i-rates are on the climb globally.....I put it at greater than 50/50 odds that the FED will do the same also in a few months. Fed need to mop up excess liquidity to break commodity inflation price pressure now feeding into economy.
 
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