China Tells

As the biggest creditor of USA, China plays a significant role in influencing the policy of Washington. However, China’s huge reserve in USD and US Treasury is also vulnerable to any meaningful move from US government’s fixcal policy and the move of other major creditors (See Graph from Chinatells). How China government deals with this dilemma is the main challenge in the near future (See Article from WSJ). Looking back into the history, GIC countries used to face a similar difficult situation. During the 1970s when oil crisis happened twice during that period, gulf countries went through a few strategies to defend their reserve in USD. First the oil producers propose to price the oil in alternative currencies; second OPEC countries let the oil price go up in part to compensate the value loss in USD, and last some OPEC members did shift the reserve from USD to others. It seems that some of the strategies that China government is using now is similar to the above. It takes time to review and judge whether China’s strategy will be successful in preserving the value of their reserve and in the meanwhile push Washington to be serious about Dollar’s value.

中国是美国最大的债主国。因此中国对于华盛顿的许多政策都有能力加以影响。但是同时，中国的巨额外汇储备也是一大风险。历史上石油出口国曾经遇到过类似情况。70年代石油危机美国通胀肆虐，美元币值有大幅贬值的危险。石油国家通过一系列精心策划的策略成功逼迫美国政府大力整顿通胀并且保护了美元币值。这次中国能否取得一样或者更大的成功让人拭目以待。