US Debt Is In Urgent Need Of &Nbsp; Roach And Xie Guozhong Are Fighting For China.

U.S.A debt The persistence of the upper limit negotiations deadlock the security of US Treasuries. As the largest overseas holder of US Treasury bonds, how should China react to this? There are foreign media analysts believe that falling into the "dollar trap" in China and Japan and other countries may be powerless, can only be anxious.

However, some people do not think so. The two internationally renowned economists both give China a "weapon". Roach, a leading economist and a non executive chairman of greater Molo Asia, said 29, with China's Readjustment of its economic growth strategy and ideas, Beijing has issued strong messages of confidence in Washington, and China's demand for US Treasury bonds will gradually diminish. Xie Guozhong, an independent economist, suggests that China should buy American stocks, which are more reliable and safe investments.

　　 The "dollar trap" has left China no choice?

The Wall Street journal published a number of articles this week, pointing out that although the US debt problem is worrying, China is forced to accept all this under the constraints of all kinds of restrictions.

There is a view that China and Japan hold a lot. US debt Countries are facing a "dollar trap" dilemma, which allows them to continue to buy and hold treasury bonds.

The so-called "dollar trap" means that if the central banks of China and Japan want to sell some of the huge US Treasury positions, or even show signs of such willingness, the currencies of these countries will fall against the US dollar. This will force them to intervene in the foreign exchange market and buy dollars to prevent exports from being hit hard. Therefore, such a trap also makes these central banks have to continue to invest US dollars into US Treasury bonds. At the same time, the US Treasury bond market is the only bond market in the world that can accept such a large capital and liquidity.

The US Treasury bond market has a total of US $9 trillion and 300 billion outstanding, which is second only to the largest Japanese bond market in the world, with a size of US $9 trillion and 700 billion. 90% of Japan's national debt is different from domestic investors. About half of US debt is held by foreign investors, which is also in line with the Asian central bank's pursuit of large external assets and high liquidity.

Mansoor, chief foreign exchange strategist at Swiss bank, believes that the US Treasury bond market is the only bond market in the world that can accommodate about 10 trillion US dollars in foreign exchange reserves. The scale of German bond and British bond market is only about 1 trillion dollars, while the gold market is smaller.

Roach: China will eventually say "no".

Roach, a non executive chairman of Morgan Stanley Asia and a professor at Yale University, believes that China will soon be intolerable to the largest overseas holder of US Treasuries in the face of endless political games in Washington. With China's loss of confidence in the US government, China's demand for US Treasury bonds will gradually diminish.

"China has always admired the economic strength of the United States, but now China has lost confidence in the US government and its ability to manage the economy. During my recent visit to Chinese cities such as Beijing, Shanghai, Chongqing and Hongkong, I personally felt this strong message." Roach wrote in a recent report sent to the Shanghai Securities Journal by e-mail on 29 th.

Roach said that after the Asian financial turmoil in 1997, China accumulated a large amount of US debt, and China's long term pegged exchange rate mechanism decided that China had to keep buying US debt. But this is no longer the case. China has realized that the continued growth strategy of dependence on exports and a large accumulation of US dollar foreign exchange reserves has made little sense.

In Roach's view, there are three reasons that have led to this change in China's thinking: first, this round of global financial crisis has sounded the alarm for China. Although China's exports remain competitive, the outlook for external demand has become increasingly uncertain. Whether the United States, the euro zone or Japan are dragged down by negative factors such as the aftermath of the crisis and sovereign debt problems, domestic demand is expected to remain at a very low level for a long time, which will directly affect China's exports.

Second, the risks faced by China's large number of US dollar assets are enlarged because of the political factors of the United States. The idea of "debt free" is gradually outdated. In recent years, Chinese leaders have repeatedly expressed concern about the US fiscal policy and the security of US bonds. Although China's leaders believe that the US will eventually avoid default, there is another growing concern, that is, the US authorities are only taking repeated tactics of delay, and the debt problem will become more and more serious over time.

Finally, the Chinese government has become increasingly aware of the importance of macroeconomic structural adjustment and has included relevant content in the 12th Five-Year plan. As a result of efforts to boost domestic demand, Roach expects China's share of consumption to account for GDP, which is expected to increase by at least 5 percentage points by 2015.

"Washington politicians may be arrogant that China has no courage to tear its face on investing in US debt. After all, where else can they invest in addition to US debt? Why are they risking the loss of large US dollar assets? " Roach wrote.

But Roach pointed out that to this day, China's answer has been very clear. "China is unwilling to risk its financial and economic stability again to believe Washington's empty political commitment and poor economic management capabilities. The Chinese will eventually say "no".

Xie Guozhong:

Buy us energy and agriculture shares

Xie Guozhong, an independent economist, believes that China should buy US stocks rather than US Treasuries because of concerns that the US debt default or credit rating is down, because US stocks may be a safer investment.

"The US stock market can become a reliable alternative," Xie Guozhong said in a media interview in Shanghai on 28. "American companies have strong performance and many products are sold to emerging markets. Although American stocks are not cheap according to historical standards, they are a better investment than US Treasuries. "

"China should buy American stocks," Xie Guozhong said. shares Better than bonds. " He is optimistic about energy and agricultural enterprises in the US, because commodity demand from emerging economies will continue to rise.

The US stock market has continued to decline in recent years, dragged down by the deadlock in debt talks. The S & P 500 has fallen by 3.3% since July 22nd. So far this year, the index is still up 3.4%.

Standard & Poor's 500 Index constituent companies have beaten analysts' performance expectations for 10 consecutive quarters. Last year's earnings per share broke the previous record of 84.66 US dollars in 2007. The average forecast of Bloomberg information shows that analysts expect the earnings of the S & P 500 index company to grow by 17% this year.

Xie Guozhong also pointed out that the possibility of default in the United States may stimulate. capital The flow into emerging markets has led to rising inflation in countries from China to India. In October last year, Xie Guozhong said that China would face a "vicious battle" against inflation. In June this year, China's inflation rate jumped to a 3 year high. In April 2007, Xie Guozhong also made an accurate prediction of the collapse of China's stock market.

Data from the US Treasury in June showed that China's holdings of US Treasuries rose to a record $1 trillion and 149 billion as of April, becoming the largest overseas investor of US Treasuries.