Aug. 3 (Bloomberg) -- U.S. Treasuries fail to provide safety or liquidity when it comes to managing Chinaâs $2.45 trillion foreign-exchange reserves, said Yu Yongding, a former central bank adviser. âI do not think U.S. Treasuries are safe in the medium-and long-run,â Yu, a member of the state-backed Chinese Academy of Social Sciences, wrote yesterday in an e-mailed response to questions. China is unable to sell the securities in a âbig wayâ and a âscary trajectoryâ of budget deficits and a growing supply of U.S. dollars put their value at risk, he said. http://noir.bloomberg.com/apps/news?pid=20601087&sid=aHEPmPSy75ag&pos=4 Ouch. Do I smell a danger sign here ? The cost of pegging the Chinese currency to the dollar is âintolerably highâ and threatens the welfare of Chinese people, Zhang Ming, deputy chief of the International Finance Research Office at the Chinese Academy of Social Sciences, wrote today on the website of China Finance 40 Forum. âThe U.S. government has strong incentives to reduce its real burden of debt through inflation and dollar devaluation,â he said. âWhichever way it is, the yuan-recorded market value of Treasuries will fall, causing huge capital losses to Chinaâs central bank.â ...
What ever that guy says, I would not be surprised if the opposite will be true. I would also not rule out that he is saying hoping that it triggers a selloff, thus allowing their bank to buy more US debt. I would Follow what they do, not what they say.