China Worried About U.S. Printing Money

China is worried about America’s decision to resort to “credit easing”—a modern way of printing money—to try to get out of financial troubles. This may force China to find alternatives to the dollar, according to one official.

Cheng Siwei, former vice-chairman of the Standing Committee and China’s green energy chief, said Beijing hoped the Americans would change their monetary policy “as soon as they have positive growth again.” “If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in U.S. bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies,” he said.

Telegraph columnist Ambrose Evans-Pritchard described Cheng as “a sort of economic ambassador for China around the world.”

Cheng also stated that the Chinese are looking at gold as an alternative to the dollar. “Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not stimulate the market,” he said.

France, Russia and India have also called for an end of the dollar’s role as the world’s reserve currency. On Monday the United Nations conference on Trade and Development joined the chorus. “An economy whose currency is used as a reserve currency is not under the same obligation as others to make the necessary macroeconomic or exchange-rate adjustments for avoiding continuing current account deficits,” said the report. “Thus, the dominance of the dollar as the main means of international payments also played an important role in the build-up of the global imbalances in the run-up to the financial crisis.”

As more and more countries begin to look for an alternative for the dollar, watch for that alternative to emerge. For more information on what this alternative will look like, see our article “World Prepares to Dump the Dollar.”