China starts to float its currency

NYT. China began to appreciate its currency. The BIG question: will China dump its $750 billion in US treasuries? I suspect they will (at minimum, they will diversify it into the basket of currencies that define the new float). If they don't, they are flushing the value of these bonds down the toilet and they will unable to maintain the new float. Second, I doubt that China will reward the US with a clean (unburdened with negatives) re-evaluation at the very moment CNOOC's bid for Unocal was rejected due to "political risk."

Comments

[Fred Grott]

Maybe I missed something in the NYT article..

China has ye tot adopy afully felxible current rate policy..

Since they still will not peg their currency higher it woudl seem this still encourages more buying of uS bonds to balance the system out just like their past policy..

Or did I miss something?

Alos, one has to be aware of who the biggest buyer is in the China market and that effect..ie China will not rock the boat with giant steps but baby ones..

Thus no dumping of US bonds anytime soon..

However, there is an exception..

If some countires economy becomes US like to alow Chian to switch from US bonds to other bonds..