Is the value of the Dollar subject to the whims of China?
"October 10, Bloomberg - - China, whose foreign exchange
reserves are set to exceed $1 trillion, risks an erosion of its
holdings because the dollar will probably decline, said Fan Gang,
a member of People's Bank of China's policy committee.
The dollar may extend its losses as there is too much
supply of the currency in foreign-exchange markets, Fan said at
a Beijing seminar titled ``Sino-China Contest Amid China's
Financial Reform.'' The dollar has weakened 5.7 percent against
the euro this year.
``If the U.S. dollar keeps declining, the value of our
reserves will drop, that is the risk we have to take,'' said Fan.
``But there are not many other choices. There are other
currencies such as the euro.''
China's foreign exchange reserves stood at $941 billion at
the end of June and will reach $1 trillion in coming months,
said Fan. The U.S. trade deficit with China totaled $19.6
billion in July, close to an all-time high of $20.5 billion in
October 2005."