The attack does not stop here. Other, unspecified, currencies urgently need to replace FRns as the world's reserve currency.
The commentary on the front page of the oversea's print edition of People's Daily had some advice for Asia and Europe as well. In a not too polite style - a far step from traditional Chinese reserve - both economic regions were told they "should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies."
From the Reuters report:
The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.The People's Daily is the official newspaper of China's ruling Communist Party. Its articles do not exactly pronounce the leadership's view, but its opinion pieces reflect a growing criticism on the current Euro-American dominated financial system.
The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.
Although China remained quiet on the subject when hosting a financial summit with 43 countries over the weekend their drive towards a financial order reflecting the importance of Asia will not stop. China is well known for its polite stubbornness and a very long term oriented policy while steering the most populous country of the world towards more prosperity.
Yuan's Currency Controls Make It a Non-Contender for Reserve Currencies
A Reuters analysis from Monday concludes that the Yuan is not going to become a reserve currency anytime soon, citing officials of the Chinese central bank. It also said that criticism in the US' affairs are overshadowed by the risks for China of holding so many dollars in its reserves. China's FRN reserves have surpassed the TRILLION mark long ago, it is estimated.
Interestingly, the People's Bank of China website links from the front page to its balance sheet from 2004 only. A lot has changed since, considering the foundation of China's sovereign wealth fund, that used part of its $1.3 TRILLION treasure to buy stakes in US corporations and now registers heavy losses on these early investment ventures abroad.
Getting Out of the Dollar With As Little Damage As Possible
China's long breath on the issue may be part of the tactics applied. First it will want to divest out of US debt with as little damage and losses as possible. Chinese economists know very well that the country could choke the US debt market any minute. I would not count on any friendly support from the dragon country.
Britain's opium war plays as much a historical role as the long reign of Communist leader Mao Zedong as does the reintroduction of university classes in Confuzianism, a philosophy once regarded as "overcome" by the communists. What feelings would you have for your former oppressors?
While playing it on the moderate side at the financial summit, official Chinese media drove home a couple of points on Monday, showing the muscles China has while suffering from the global slowdown.
According to a release on China's government website,
China's share of the world's combined gross output rose to 6 percent at the end of 2007, compared with just 1.8 percent in 1978 when its reform and opening-up began, the National Bureau of Statistics (NBS) announced on Monday.Take such news as a strong sign that China will insist on a bigger international role according to its phenomenal growth in the past 3 decades. In stark contrast to the slowdown in Europe and the USA official Chinese figures confirm the expectation that China will manage a controlled cooling of its economy that was in danger of overheating only a year earlier.
Fast economic growth over the last 30 years had lifted China's GDP ranking in the world from 10th in 1978 to fourth after the United States, Japan and Germany.
It stood at 3.28 trillion U.S. dollars in 2007, about 23.7 percent of that of the U.S., 74.9 percent of Japan's and 99.5 percent of Germany's, said an NBS statement on its report on China's development since 1978.
By the World Bank rankings, China was a developing economy falling into the category of lower middle income, with per capita income ranging between 936 and 3,705 U.S. dollars.
Per capita income jumped to 2,360 U.S. dollars in 2007 from 190 U.S. dollars in 1978.
According to Chinadaily,
China's economy, one of the fastest-growing economies in the world and the biggest contributor to global growth, grew 9.9 percent year-on-year in the first three quarters of this year.Inflation in a Downward Spiral
In the third quarter, the gross domestic product (GDP) growth rate slowed down to 9 percent, the lowest in five years, from 10.6 percent in the first quarter, 10.1 percent for the second quarter and 10.4 percent in the first half of 2008.
China's economic growth has been on a steady decline since peaking in the second quarter of 2007.
At the same time China managed to contain inflation:
Another widely watched indicator, the consumer price index (CPI) - an important measure of inflation - rose 4.6 percent in September, over the same period last year.
The figure, coupled with 7.1 percent in June, 6.3 percent in July, 4.9 percent in August and a nearly 12-year-high of 8.7 percent in February, shows the CPI in a downward spiral.
Analysts mainly attribute the decline in the CPI to ample grain supply and lower-than-expected income growth of Chinese residents, as the housing and stock markets take heavy toll, which dented residents' desire to consume.
GRAPH: China has managed a controlled economic slowdown despite external and natural disasters. Chart courtesy of Chinadaily.comChinadaily has another commentary today that clearly signals that the country aspires to much more than just an also-ran in the international world order. Or how would you interpret the headline "New order needed to meet global challenges?"