Growing concerns about the slow death of the dollar rather than a saviour’s goodwill are underpinning China’s widely publicised purchases of European government debt, according to experts. But as the Eurozone debt crisis spreads from Greece and Portugal to countries like Italy and threatens the very survival of the euro, China’s finance mandarins and keepers of the country’s 3 trillion dollars foreign reserves are looking yet again at gold as the anchor of stability.
Yu Yongding, a former adviser to the Central Bank of China and strong critic of US treasury bonds, an asset in which about 1.2 trillion dollars of China’s foreign reserves are invested, has been calling on Chinese rulers to diversify as much as possible of China’s holdings to guard against a weaker dollar.
Speaking at a global economic forum in Beijing this month Yu said the US debt and its ratio against the country GDP were rising, and predicted trouble for all US assets and the global economy.
Yu is in company of big banks like Goldman Sachs predicting a slow and steady decline of the dollar. Yu believes that from 1929 to 2009 the purchasing power of the greenback has declined by 94 percent. Goldman Sachs forecasts it will lose 15 percent of its value against the British pound over the next 12 months alone.
Investors all over the world have begun moving their cash reserves into other currencies to cut exposure to the US dollar in the belief it will continue losing in value. read here