Ailing US economy could drive up prices in China
Source: Agencies |
July 15, 2011, Friday
|
Print Edition
Print Edition
China is watching whether the United States Federal Reserve launches a new stimulus that might hurt China by pushing up commodity prices, a State Council researcher said yesterday.
The US economy "has been doing worse than expected" and China needs to "seriously assess" possible risks to its vast holdings of American debt, said Yu Bin, an economist in the State Council's Development Research Center.
"The prospects of the US economy are worrying," Yu said at a news briefing in Beijing.
Yu expressed concern about a possible third round of Fed purchases of government bonds, known as "quantitative easing" or QE.
He said that might hurt China by depressing the value of the US dollar and driving up prices of commodities needed by its industries. Most commodities are traded in dollars.
The Fed bought US$600 billion in bonds late last year and early this year to keep interest rates low and support prices of assets such as stocks.
On Wednesday, Chairman Ben Bernanke said the Fed was ready to take action if the US economy weakens and said a third round of purchases was a possible option.
"We are following closely whether the United States will introduce QE3, because we believe it will have a major impact on China's economy," said Yu, director-general of the Development Research Center's Department of Macroeconomic Research.
"The drastic rise in commodity prices caused by the devaluation of the US dollar will have a major impact on inflation, on economic growth and on Chinese people's daily lives," he said.
Yu warned that such a move would also affect the "long-term trajectory of the US economy."
"Therefore, I believe the United States should be careful," he said.
China held some US$1.15 trillion in US Treasury debt as of the end of April, according to the latest data.
Chinese leaders have repeatedly appealed to Washington to avoid taking steps in response to US economic weakness that might erode the value of the dollar and ?hina's holdings.
"As the largest buyer and holder of US Treasury bonds, we need to seriously assess the risks," Yu said.
He said China could reduce risks by restructuring its portfolio of foreign reserves and assets, though he gave no details.
And he said that in the long run, China has to keep a reasonable level of foreign reserves.
Moody's Investors Service on Wednesday said it was reviewing the US bond rating for a possible downgrade, saying there is a small but rising risk that the government will default.
Yesterday, a Chinese rating agency said it was putting US sovereign debt on watch for a possible downgrade.
"Factors influencing the US government's ability to repay its debt are steadily worsening," said the Dagong Global Credit Rating Co.
The US economy "has been doing worse than expected" and China needs to "seriously assess" possible risks to its vast holdings of American debt, said Yu Bin, an economist in the State Council's Development Research Center.
"The prospects of the US economy are worrying," Yu said at a news briefing in Beijing.
Yu expressed concern about a possible third round of Fed purchases of government bonds, known as "quantitative easing" or QE.
He said that might hurt China by depressing the value of the US dollar and driving up prices of commodities needed by its industries. Most commodities are traded in dollars.
The Fed bought US$600 billion in bonds late last year and early this year to keep interest rates low and support prices of assets such as stocks.
On Wednesday, Chairman Ben Bernanke said the Fed was ready to take action if the US economy weakens and said a third round of purchases was a possible option.
"We are following closely whether the United States will introduce QE3, because we believe it will have a major impact on China's economy," said Yu, director-general of the Development Research Center's Department of Macroeconomic Research.
"The drastic rise in commodity prices caused by the devaluation of the US dollar will have a major impact on inflation, on economic growth and on Chinese people's daily lives," he said.
Yu warned that such a move would also affect the "long-term trajectory of the US economy."
"Therefore, I believe the United States should be careful," he said.
China held some US$1.15 trillion in US Treasury debt as of the end of April, according to the latest data.
Chinese leaders have repeatedly appealed to Washington to avoid taking steps in response to US economic weakness that might erode the value of the dollar and ?hina's holdings.
"As the largest buyer and holder of US Treasury bonds, we need to seriously assess the risks," Yu said.
He said China could reduce risks by restructuring its portfolio of foreign reserves and assets, though he gave no details.
And he said that in the long run, China has to keep a reasonable level of foreign reserves.
Moody's Investors Service on Wednesday said it was reviewing the US bond rating for a possible downgrade, saying there is a small but rising risk that the government will default.
Yesterday, a Chinese rating agency said it was putting US sovereign debt on watch for a possible downgrade.
"Factors influencing the US government's ability to repay its debt are steadily worsening," said the Dagong Global Credit Rating Co.
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