Is China making its move?
Posted on jsmineset.com March 8
China offers other Brics renminbi loans
By Henny Sender in Hong Kong and Joe Leahy in São Paulo
March 7, 2012 8:06 pm
China intends to extend renminbi loans to other Brics nations, in another step towards the internationalisation of its currency.
The China Development Bank will sign a memorandum of understanding in New Delhi with its Brazilian, Russian, Indian and South African counterparts on March 29, say people familiar with their talks. Under the agreement CDB, which lends mainly in dollars overseas, will make renminbi loans available, while the other Brics nations’ development banks will also extend loans denominated in their respective currencies.
Why do I find this important? For many years the Chinese have been buying commodities (such as copper) mines and other commodity based assets as fast as they could. Makes good business sense. Invest your profits to secure against price and supply disruption. And they did have a lot of profits resting on an increasingly shaky US dollar base. Commodities in hand were far better.
Last week I noticed a couple of separate news items. One specifically dealt with a new announcement that China was prepared to ”do business” with their trade partners in Yuan. The second was a chart showing that their percentage reserves in USD have dropped from 65% to 54% in two years!!! Given the absolute size of their reserves their announcement of a year or two ago that they would “diversify out of the US dollar,” they are doing so at a mind boggling pace. Almost impossible to move those quantities in the foreign exchange markets without major disruption. My antennae went straight up.
Todays announcement is especially significant to me. In my mind there cannot be any good for the USD in these moves and their subsequent reactions. This has to be a nuclear attack where the Chinese assume that they will get hurt but not nearly as much as the current entities in the world financial system. In fact that is probably true, especially since the US has depleted its financial nuclear stockpile. As well, The US has its hands tied via the amount of bonds the Chinese hold. The Chinese Satan has the US pinned on its fork and is offering the choice of two doors, Damned if you do and Damned if you don't. The current Chinese mood is very Machiavellian. Look at what books are best sellers in China. Not fiction but get ahead at all costs no matter who it destroys.
It looks to me as if the Chinese are making their move. TEOTWAWKI looms.
Allen
