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The Chosun Ilbo: Super-Sovereignty Reserve Currency Triggers US-China Currency War

China recently suggested the creation of a “global currency” to replace the US dollar. The US is firmly against the proposal. US President Obama told the press on the March 24 that “the US dollar is extraordinarily strong.” Primary US economic officials retorted on the same day.

Despite US rebuttal, Mr. Zhou Xiaochuan, Governor of the central bank of China, mentioned this “international reserve currency” issue again on March 25. The new members of the G20 are skeptical about the current international currency system.

The article quoted a Russian official announcement on the necessity of a G20 discussion on a new IMF international currency. The British Prime Minister was also quoted on his dismissal of such a discussion.

Source: The Chosun Ilbo, March 26, 2009
http://chn.chosun.com/site/data/html_dir/2009/03/26/20090326000033.html

Xinhua Commentary: China Should not Have a High Tone at the G20

Xinhua published an article suggesting that China should take care of itself before playing a major role in the international financial system. It argued that the governor of the central bank of China, Zhou Xiaochuan’s suggestion of “replacing the US dollar” with a Super Reserve Currency under the IMF is unrealistic. Even if that happens, China may still not get more say at the IMF as it has been single-handedly maneuvered by the US for so long.

It further argued that so far China has been less impacted by the financial crisis not because China has a sound financial system, but rather because China’s financial system has not been fully opened to the world. China’s social and political systems are not yet ready for China to play the role of world financial leader.

So China should continue to remain low key. Its practical approach is to reduce the IMF’s international role by diverting the IMF into other regional financial and economic organizational roles and develop the Renminbi to make it strong enough to stand up to the US dollar and the Euro. Only when China is capable of providing the alternative currency reserve, can China have the ability to establish a just and fair international financial order.

Source: Xinhua, March 30, 2009
http://news.xinhuanet.com/herald/2009-03/30/content_11098132.htm

US Vigilant of China’s Challenge to US Dollar

Global Times, under Chinese state daily news, Renmin, reported from New York that the United States responded strongly against China’s call for a new international reserve currency to replace US dollar.

The report referred to an AFP article which quoted President Obama as stating that the“US dollar is extraordinarily strong” on March 24.
 
Earlier, US Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner both agreed that they’ll “unconditionally” refuse the switch to an international currency. The Wall Street Journal reported the story in an article entitled :“China Points the Finger at US Dollar”. The New York Times believes that this demonstrates China’s worry about the safety of its assets in US dollars as well as China’s intent to use this as a playing card in the G20 Summit.

Source: Renmin/Global Times, March 25, 2009
http://world.huanqiu.com/roll/2009-03/414150.html

BBC’s Field Visit to China’s Economy

According to the British Broadcasting Corporation (BBC), the Chinese economy is facing a major test. China recently released that exports dropped by 25% in February.

BBC business editor Robert Peston recently visited China’s coastal regions.  According to his observations, the southern provinces, unlike Shanghai where the situation is still holding up, are near desperate.  Many factories have shutdown; unemployment is rising. Due to reduced export demand, some companies have relocated to lower operating costs.

Southern China, as Peston sees it, has already fallen into a serious economic recession.  However, official figures still provide an optimistic picture, stating that the economy is just taking a slower pace.

Source:

BBC Chinese  March 20, 2009
http://news.bbc.co.uk/chinese/simp/hi/newsid_7950000/newsid_7954500/7954580.stm

Government Waste/Corruption Documented

China’s Transition Institute (Zhuan Zhixing), a think tank like NGO for socio-economic transformation published a 2008 Handbook of Citizen’s Tax Rights. The book lists sources of government waste:

"There are about four million government vehicles in China that cost the government an annual 200 billion Chinese Yuan (30 billion USD) to operate; however, only about one third of the use is for official business."

"Rough estimates say the government spends at least 200 billion Yuan on dining costs each year, which is equivalent to the cost of the Three Gorges Damn Project."

"In the past year travel overseas for government officials on fact finding/training trips has continued for many locations. At present China’s officials spend more than 300 billion Yuan (44 billion USD) on travel abroad."

"Waste from political building projects–a number of local governments went into debt building ultra-luxurious public squares, theaters, gyms, airports, golf courses, etc. A poor county government in one province spent 70 million Yuan (10 million USD) on a government building, which is equivalent to one third of that county’s yearly income."

Source:
2008 Handbook of Citizen’s Tax Rights
http://www.zhuanxing.cn/search.asp#

Return Rate of Chinese Students Studying Overseas Less than 30 Percent

According to news released yesterday by the Ministry of Education of the PRC, China has sent 1,391,500 students to study overseas via various avenues over the last 30 years. Among them, about one million remained abroad. Only 390,000 returned to China, a return rate of 28 percent.

Source: China News Agency, March 26, 2008
http://www.chinanews.com.cn/edu/kong/news/2009/03-26/1618111.shtml