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China tells US to slow money printing presses

January 26, 2013

China is the biggest purchaser of US Treasury bonds, using its enormous foreign currency reserves primarily to buy US securities as a long-term investment. — AFP picChina is the biggest purchaser of US Treasury bonds, using its enormous foreign currency reserves primarily to buy US securities as a long-term investment. — AFP picDAVOS, Jan 26 — A senior Chinese official said yesterday that the United States should cut back on printing money to stimulate its economy if the world is to have confidence in the dollar.

Asked whether he was worried about the dollar, the chairman of China’s sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: “I am a little bit worried.”

Jin said he was confident that the Obama administration and Congress would ultimately solve the debate over the so-called fiscal cliff, “but of course the printing machine will have to slow down for people to have full confidence in the dollar”.

China is the biggest purchaser of US Treasury bonds, using its enormous foreign currency reserves primarily to buy US securities as a long-term investment.

“There will be no winners in currency wars. But it is important for a central bank that the money goes to the right place,” Li said.

Speaking at the same session, French Finance Minister Pierre Moscovici voiced concern that the euro was becoming overvalued as a result of quantitative easing and other stimulus actions taken by other nations’ central banks.

“Certainly, the level of the euro is high and creates some problem,” he said, attributing the single currency’s recent gains partly to the return of confidence created by the European Central Bank and euro zone governments in starting to overcome Europe’s debt crisis.

Moscovici called for cooperation between various areas of the world “to get to a real and good level of currencies”.

The euro has gained 10 per cent against the dollar and more than 20 per cent against the yen since last July when ECB chief Mario Draghi vowed to do whatever it takes to preserve the single currency.

Deutsche Bank co-chief executive Anshu Jain said the euro had appreciated partly because fears of a break-up of the currency area had receded, and more recently because of quantitative easing in the United States.

The US Federal Reserve announced a third wave of asset purchases last month and has vowed to keep monetary policy exceptionally loose until unemployment falls below 6.5 per cent in a drive to stimulate economic growth. — Reuters

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