Top Chinese Banker Guo Shuqing Calls for U.S. Government to Start Issuing Bonds in Yuan, Rather than Dollars
June 8th, 2009Via: Telegraph:
The head of China’s second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars, in the latest indication of the increasing importance of the Chinese currency.
Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), also said he is exploring the possibility of issuing loans to trading companies in yuan, allowing Chinese and foreign companies to settle their bills in yuan rather than in dollars.
Mr Guo said the issuing of yuan bonds in Hong Kong and Shanghai would help to develop the debt markets in China and promote the yuan as a major international currency.
It was the first time the head of a major Chinese bank has called for the wider use of the yuan, although a chorus of senior government officials have already voiced their concerns about the stability of the dollar and have said the yuan should be used more widely.
“I think the US government and the World Bank can consider the issuing of renminbi bonds,” he said, asking for a “mutual cooperation” between the US and China to promote Chinese financial services. He said bond issuance could be relatively small, at between 1bn and 3bn yuan (£100m to £300m).
HSBC and Standard Chartered have both said they are preparing to issue bonds denominated in yuan.
Mr Guo is a former head of China’s foreign-exchange administration, which manages the country’s $1.9 trillion foreign exchange reserves. He said he was confident the yuan would become a major currency in the medium-to-long term.
Issue US-bonds denominated in Yuan/Renminbi? Is this guy clueless? He really runs a major Chinese bank?
I mean, not that it isn’t feasible, and there’s certainly precedent…but that’s sort of like if the US Gov’t said they were going to print Dollar bills with the phrase “backed by the full faith and credit of the Chinese Government”…
Their point of course is that foreign lenders CAN’T stop buying US bonds altogether, for a number of reasons not the least of which is that they’d be trashing their current holdings. And yet, because those bonds are denominated in crappy-ass Dollars they keep losing value while waiting for maturity.
But, I mean, c’mon now…not only is this not going to happen – since the US doesn’t want the FX risk either – but such bonds would never be permissible for domestic portfolios, so virtually every US State would revolt as they realize the Fed is selling them down the toilet in an effort to stem losses in foreign markets. I’m sure they’d come up with some convoluted justification for why this isn’t the case, but you can’t change the fact that “trash in” means “trash out”.
This story is ridiculous, but what’s interesting is how it’s becoming more and more clear that the financial world is just pulling turd after turd out of their collective asses anymore, seeing which ones actually fly and buy just one more quarter or two of business as usual.
i don’t agree. they CAN stop buying US bonds altogether, when they decide it’s time to pull the plug. they are preparing for that day. they know they will lose a significant percentage of their current holdings. it’s a given. the question is, how much can they salvage, in what form, and how can they keep it secure? haven’t the Chinese central bank started buying shorter-maturity bonds already? are they not trying to use their useless dollars to buy hard assets, resources and means of production around the world? are they not accumulating gold? foodstuffs? oil? coal? iron ore? copper? rare earth minerals? look, the US dollar is in a death spiral. even if China carried on buying US bonds, BAU, there has to come an end, when too many quadrillions of debt is just too many. surely the Chinese govt. wants to be in control of their own destiny as much as they can engineer. demanding RMB-denominated debt is hardly a stupid idea. it’s a signal. they are saying “we have played your game, now you play ours”