IT is getting harder for governments to buy United States Treasuries
because the US's shrinking current-account gap is reducing supply of
dollars overseas, a Chinese central bank official said yesterday.
The
comments by Zhu Min, deputy governor of the People's Bank of China,
referred to the overall situation globally, not specifically to China,
the biggest foreign holder of US government bonds.
Chinese
officials generally are very careful about commenting on the dollar and
Treasuries, given that so much of its US$2.3 trillion reserves are tied
to their value, and markets always watch any such comments closely for
signs of any shift in how it manages its assets.
China's State
Administration of Foreign Exchange reaffirmed this month that the
dollar stands secure as the anchor of the currency reserves it manages,
even as the country seeks to diversify its investments.
In a
discussion on the global role of the dollar, Zhu told an academic
audience that it was inevitable that the dollar would continue to fall
in value because Washington continued to issue more Treasuries to
finance its deficit spending.
He then addressed where demand for that debt would come from.
"The
United States cannot force foreign governments to increase their
holdings of Treasuries," Zhu said, according to an audio recording of
his remarks. "Double the holdings? It is definitely impossible."
"The
US current account deficit is falling as residents' savings increase,
so its trade turnover is falling, which means the US is supplying fewer
dollars to the rest of the world," he added. "The world does not have
so much money to buy more US Treasuries."
China continues to
see its foreign exchange reserves grow, albeit at a slower pace than in
past years, due to a large trade surplus and inflows of foreign
investment. They stood at US$2.3 trillion at the end of September.
http://www.shanghaidaily.com/article/print.asp?id=423054
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