Thread: China, Russia quit dollar - Resort to their own currencies

Asia One Business
By Su Qiang and Li Xiaokun

China, Russia quit dollar

St. Petersburg, Russia - China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.

The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.

"That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said.

Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.

The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communiqu. Details of the documents have yet to be released.

Putin said one of the pacts between the two countries is about the purchase of two nuclear reactors from Russia by China's Tianwan nuclear power plant, the most advanced nuclear power complex in China.

Putin has called for boosting sales of natural resources - Russia's main export - to China, but price has proven to be a sticking point.

Russian Deputy Prime Minister Igor Sechin, who holds sway over Russia's energy sector, said following a meeting with Chinese representatives that Moscow and Beijing are unlikely to agree on the price of Russian gas supplies to China before the middle of next year.

Russia is looking for China to pay prices similar to those Russian gas giant Gazprom charges its European customers, but Beijing wants a discount. The two sides were about $100 per 1,000 cubic meters apart, according to Chinese officials last week.

Wen's trip follows Russian President Dmitry Medvedev's three-day visit to China in September, during which he and President Hu Jintao launched a cross-border pipeline linking the world's biggest energy producer with the largest energy consumer.

Wen said at the press conference that the partnership between Beijing and Moscow has "reached an unprecedented level" and pledged the two countries will "never become each other's enemy".

Over the past year, "our strategic cooperative partnership endured strenuous tests and reached an unprecedented level," Wen said, adding the two nations are now more confident and determined to defend their mutual interests.

"China will firmly follow the path of peaceful development and support the renaissance of Russia as a great power," he said.

"The modernization of China will not affect other countries' interests, while a solid and strong Sino-Russian relationship is in line with the fundamental interests of both countries."

Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a "fair and reasonable new order" in international politics and the economy.

Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.

Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents.

Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government.

He left St. Petersburg for Moscow late on Tuesday and is set to meet with Russian President Dmitry Medvedev on Wednesday.

Source: http://business.asiaone.com/Business/Ne ... 48833.html

Anyone who didn't see this coming has got to be either be a Republican or a Democrat (congressman or senator).

China threatens 'nuclear option' of dollar sales

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.

"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.

"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.

The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decicions being made in Beijing, Shanghai, or Tokyo".

She said foreign control over 44pc of the US national debt had left America acutely vulnerable.

Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.

"The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles," he said.

A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.

The yuan has appreciated 9pc against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9bn in June.

Henry Paulson, the US Tresury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".

Mr Paulson is a China expert from his days as head of Goldman Sachs. He has opted for a softer form of diplomacy, but appeared to win few concession from Beijing on a unscheduled trip to China last week aimed at calming the waters.

http://www.telegraph.co.uk/finance/mark ... sales.html

We can't go on the way we were. What was that the founding fathers said about avoiding foreign entanglements? Nobody says the way back will be easy, but we have to start doing something radically different. Globalism is a one way ticket to third world misery for the US.

I hope the Chinese do stop buying our debts. The fall will be hard, but the longer we wait the harder our fall will be.

W

Originally Posted by ALIPAC

I hope the Chinese do stop buying our debts. The fall will be hard, but the longer we wait the harder our fall will be.

W

Exactly. We're still at the point where we have abundant farmland, skilled workers, factories, homes, it would be a hard bump but we can recover.

Originally Posted by BetsyRoss

Originally Posted by ALIPAC

I hope the Chinese do stop buying our debts. The fall will be hard, but the longer we wait the harder our fall will be.

W

Exactly. We're still at the point where we have abundant farmland, skilled workers, factories, homes, it would be a hard bump but we can recover.

We contribute to the decline of our currency, with every purchase of Chinese goods. From garlic at the grocery store, to paint brushes at the local hardware store.

I always check where a product is made and many times a USA manufactured product isn't available. Even more discouraging a product from an American company (made in China, Vietnam, Mexico) isn't available.

So, if my choice is a product made in China, vs Mexico or Canada, I chose anything except the Chinese product. Even if an American company makes the Chinese product, I may buy the item made somewhere else. In tools and hardware, the Chinese product isn't always the cheapest.

For some items at Home Depot and Lowes, the only choice is made in China. It's difficult to find nails or screws made in the USA.

The biggest mystery for me is food items. Chinese items have repeatedly been found to be harmful, yet I can find garlic, at Krogers, from China. It's the cheapest garlic available. It looks normal, but given the track record of Chinese food stuffs that have been harmful, why would anyone buy it ? I assume it sells, Kroger keeps it on the self.

Tomatoes may be home grown or imported from Mexico and Canada. I always chose home grown or Canadian. Rarely do I buy food from Mexico. I believe the Mexican food is safe, far safer than anything from China. It's just a personal, statement.

So, when we buy Chinese items, we help outsource our jobs.

Americans don't seem to understand or care. Believe me, the Germans, Japanese, Koreans and others understand. Their governments and many of their people, use their currency, to purchase their nation's goods, not imports.

Here's a similar story at this link, but it has a photo. Note that in the photo Putin is not bowing to the Chinese leader as our president did.


http://www.chinadaily.com.cn/china/2010 ... 599087.htm