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I think people have to understand the origin of the dollar reserves before imagining the implication. In the cases of Chinese and Japan (and most other export-o

by e3b0c 9y ago

I think people have to understand the origin of the dollar reserves before imagining the implication. In the cases of Chinese and Japan (and most other export-oriented economies), the accumulations of dollar reserves are the by-product of the exchange rate manipulations, which are to make their currencies undervalued to maintain the export competitiveness. The US dollar has been the 'target' of such exchange rate manipulation is mostly because of its role as the largest import economy. As a result, if China becomes the next big importer, other export-oriented countries will probably do the same trick like it has been doing to the US.

simonh 9y ago
It’s not really a trick. If you’re an exporting country and you sell a lot to the US, you’re going to end up with a lot of Dollars. Either that or you’re doing something very wrong. In any case, China hasn’t been significantly manipulating its currency at least for the last decade. Such charges had some validity in the early 2000s, but that’s old news. Since then China has largely diversified its currency holdings and it’s not really an issue, see link below, but there are stil votes in China bashing. https://www.economist.com/news/finance-and-economics/21717997-government-has-been-pushing-price-yuan-up-not-down-china-and https://www.economist.com/news/finance-and-economics/2171799... The article below from 2 years ago on this also sheds some useful light. At the time the dollar had recently rapidly appreciated against most other currencies, but the Yuan was at that point fairly strong and then stayed stable rejecting an opportunity to depreciate along with everyone else. In hindsight the articles analysis has proved to be remarkably prescient. The European banks accumulation of Yuan is testament to the increasing credibility of the Yuan, as it predicted. https://www.economist.com/news/finance-and-economics/21644205-devaluing-yuan-would-do-china-more-harm-good-currency-peace https://www.economist.com/news/finance-and-economics/2164420...

by e3b0c 9y ago

simonh 9y ago

It’s not really a trick. If you’re an exporting country and you sell a lot to the US, you’re going to end up with a lot of Dollars. Either that or you’re doing something very wrong. In any case, China hasn’t been significantly manipulating its currency at least for the last decade. Such charges had some validity in the early 2000s, but that’s old news. Since then China has largely diversified its currency holdings and it’s not really an issue, see link below, but there are stil votes in China bashing. https://www.economist.com/news/finance-and-economics/21717997-government-has-been-pushing-price-yuan-up-not-down-china-and https://www.economist.com/news/finance-and-economics/2171799... The article below from 2 years ago on this also sheds some useful light. At the time the dollar had recently rapidly appreciated against most other currencies, but the Yuan was at that point fairly strong and then stayed stable rejecting an opportunity to depreciate along with everyone else. In hindsight the articles analysis has proved to be remarkably prescient. The European banks accumulation of Yuan is testament to the increasing credibility of the Yuan, as it predicted. https://www.economist.com/news/finance-and-economics/21644205-devaluing-yuan-would-do-china-more-harm-good-currency-peace https://www.economist.com/news/finance-and-economics/2164420...