[A-List] Fw: China dismisses Fed Reserve Greenspan warning on forex operations

[Gary Santos]

One wonders if there is a side to dollar hegemony/Treasury Bill Standard
that people in the West don't see. The accumulation of "worthless" paper
assets might not be what it seems. It allows China to grow, accumulate
technology, develop its local market and raise standards of living, even if
disparate, for the price of thousands of tons of value added dirt. In the
future, when things have reached a limit, the seeming dependency could be
cut. What then? Who will need who?

----- Original Message ----- 
From: "David Chiang" <chiang.d at worldnet.att.net>
Subject: FW: China dismisses Fed Reserve Greenspan warning on forex
operations


> China dismisses Greenspan warning on forex operations
> Wed Mar 3, 3:36 AM ET  Add Business - AFP to My Yahoo!
>
http://story.news.yahoo.com/news?tmpl=story&cid=1518&ncid=1518&e=8&u=/afp/20
> 040303/bs_afp/forex_china_us
>
> SHANGHAI (AFP) - China has dismissed warnings by US Federal Reserve
(news -
> web sites) chairman Alan Greenspan (news - web sites) that it faces grave
> economic consequences if it continues to pile up massive US dollar
holdings
> as it defends the pegged yuan system.
>
> "We've seen the report," said an official at the People's Bank of China's
> press office, refusing to specifically address Greenspan's comments.
>
> "We will maintain our consistent monetary policy which is a unified,
managed
> floating exchange rate regime (based on supply and demand of foreign
> exchange in the market)," he said.
>
> Yi Gang, director of the monetary policy department of China's central
bank,
> added: "The basic point of our monetary policy is to maintain the
stability
> of the RMB (renminbi) and to promote the growth of the Chinese economy.
>
> "Both the starting point and standpoint of our monetary policy is the
> Chinese economy and in addition we also consider the international balance
> between income and expenditure.
>
> "I think the Chinese macro-economy is stable currently and that will be
> maintained."
>
> The comments, however, appeared out of keeping with those made only last
> week by China's foreign exchange chief Guo Shuqing, who made similar
points
> to those of Greenspan.
>
> Guo said the financial authorities risked losing control of the economy as
> speculative money flooded the banking system amid growing speculation the
> yuan would be revalued.
>
> "The growing surplus in the balance of payments is putting increasing
> pressure on the independence of monetary policy," Guo said.
>
> In turn this was creating inflationary pressure as easy credit continued
to
> stoke investment, especially in sectors such as steel, cars and real
estate,
> which the authorities are increasingly concerned about.
>
> In recent months Beijing has been forced to increase mopping up operations
> in the money market in efforts to absorb the excess liquidity but the
broad
> measure of Chinese money supply -- M2 -- still grew 20 percent in 2003 and
> only a little less so far this year.
>
> Greenspan said Beijing's massive buying of dollars was threatening to
create
> a glut in the monetary base and a consequent overheating of the Chinese
> economy.
>
> "Should this pattern continue, the central bank will be confronted with
the
> choice of curtailing its purchases of dollar assets or facing an
overheated
> economy with the associated economic instabilities," Greenspan warned.
>
> "Lesser dollar purchases presumably would allow the renminbi (yuan), at
> least temporarily, to appreciate against the dollar."
>
>