Saturday, November 22, 2008

Yuan Watch : Chinese want to depreciate Yuan by buying dollars 2008-11-22 22:52:03

GUANGZHOU, Nov. 22 (Xinhua) -- What China can do for the world is not to sell out its massive dollar reserve, but slightly increase its hold of the currency to give reasonable support to the U.S. effort to save its economy, said a senior economist here on Saturday.
It is indeed difficult for China to handle its huge forex reserve, as the U.S. currency has already depreciated 20 percent against the Chinese yuan, said Cheng Siwei, well-known economist at a financial forum held in Guangdong.
"China would suffer from losses if it sells off the dollar, so our strategy should be not to sell, but to slightly increase dollar reserve," said Cheng, also former vice-chairman of the Standing Committee of the National People's Congress (NPC).
Cheng made the remarks amid increasing concern that China might use its forex reserve to finance its 4-trillion-yuan stimulus plan. China held 1.9 trillion dollars worth of forex reserve by September this year.
(An oft repeated misconception. China cannot use forex to finance yuan-denominated stimulus.

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