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China can not afford to deflate the USD by supporting a move to another currency as the world reserve currency. They have too many at this time.
"...Nicholas Lardy, an economist and China specialist at the Peterson Institute in Washington, said that by making such a proposal, China was indicating that the dollar?s longstanding dominance was inherently unfair, allowing the United States to run huge deficits by borrowing from abroad, and that the risks to holders of Treasuries were growing.
?Chinese are quite concerned that the large U.S. government deficits will eventually lead to inflation, which will erode the purchasing power of the dollar-denominated financial assets which they hold,? Mr. Lardy said. ?It is a legitimate concern.?
The timing of the Chinese announcement, analysts said, could also be aimed at giving Beijing more leverage to negotiate with the United States and other nations in London on trade and on proposals about how to stabilize the global economy.
But China is cautious when it discusses buying or selling Treasuries, for fear of sending a statement that could significantly affect the currency markets.
And so in a separate announcement on Monday, China said that it would continue to buy Treasuries, something the United States has encouraged..."
"...Nicholas Lardy, an economist and China specialist at the Peterson Institute in Washington, said that by making such a proposal, China was indicating that the dollar?s longstanding dominance was inherently unfair, allowing the United States to run huge deficits by borrowing from abroad, and that the risks to holders of Treasuries were growing.
?Chinese are quite concerned that the large U.S. government deficits will eventually lead to inflation, which will erode the purchasing power of the dollar-denominated financial assets which they hold,? Mr. Lardy said. ?It is a legitimate concern.?
The timing of the Chinese announcement, analysts said, could also be aimed at giving Beijing more leverage to negotiate with the United States and other nations in London on trade and on proposals about how to stabilize the global economy.
But China is cautious when it discusses buying or selling Treasuries, for fear of sending a statement that could significantly affect the currency markets.
And so in a separate announcement on Monday, China said that it would continue to buy Treasuries, something the United States has encouraged..."
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