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Posted on November 2, 2011 by ColinTwiggs

Creditors can huff but they need debtors – FT.com

China already runs its own risk of massive losses on the currency reserves – now worth $3,200bn – it has accumulated. That was a public capital outflow aimed at supporting its trade surpluses. But, in its attempts at managing the currency relationship with the US, it is the latter that controls the central bank. China can huff and puff. But it must either buy the money the US creates, to preserve competitiveness, or stop doing so. If it buys, it throws good money after bad. If it stops buying, it imposes a shock on itself.

via Creditors can huff but they need debtors – FT.com.

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CategoriesChina & HK, US & Canada Tagscapital account, exchange rate, trade surplus, US

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