Is the value of the Dollar subject to the whims of China?
*Bloomberg, by Christina Soon, October 10, 2006
“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
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