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China plans to reduce its holdings of the US dollar

(NSNBC) Dec. 3, 2013 - China and Russia are quitting US dollar or at least significantly cutting the dollar share in their forex reserves.  Politically correct American analysts call this process "rapid forex reserves diversification".

In fact, some economists see this trend as a threshold in the unfolding world crisis because the whole pyramid of global finance is based on one simple fact - financial regulators around the world, buy the US debt (dollar & treasuries) no matter what.

"It's no longer in China's favor to accumulate foreign-exchange reserves," Yi Gang, a deputy governor of the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will "basically" end normal intervention in the currency market and broaden the yuan's daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining the reforms outlined last week following a Communist Party meeting.

Neither Yi nor Zhou gave a timeframe for any changes. It is well-known that Chinese authorities as a rule tend to avoid sharp changes in political economy. Such policies are implemented in such a discreet manner that people do not even realize the ongoing transformation.

What's interesting, the Central Banks do not announce such things so loudly. For example, over the period from the end of January 2013 to the end of July, the Bank of Russia reduced its stockpile of US Treasury securities from USD 164.4 billion to USD 131.6 billion, which means that over the course of six months, it reduced its portfolio of US Treasury obligations by USD 32.8 billion, or by 20 percent. Closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.  

Dollar cap: China limits world's highest foreign currency reserves

(RT) - China's central bank has said it no longer sees any benefit in increasing its $3.66 trillion foreign currency reserves- already the world's largest. China will cap its purchases of US dollars in an effort to limit the depreciation of the yuan.

"It's no longer in China's favor to accumulate foreign-exchange reserves," Bloomberg quoted Yi Gang, a deputy governor at the central bank as saying Tuesday.

Decreasing the influence of the dollar and other currencies is a step closer to reaching China's 2015 goal to "float" its currency and according to the People's Bank of China will help the everyday Chinese citizen.

Cross-posted from Booman's fp story - Money More Important Than Tanks . - [MICEX tanks a market warning to Putin?]

by Oui on Tue Mar 4th, 2014 at 07:38:04 PM EST

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