China News – China to use reserves to Buy up everything???

January 11, 2012

Global Macro

Just quickly from Bloomberg –

China Should Use FX Reserves for Investment: State Researcher  13:04
   China should use more of its foreign-exchange reserves to make direct investments overseas, Zheng Xinli, vice president of the state-backed China Center for International Economic Exchanges, said at a forum in Beijing today. 
• $1 trillion of forex reserves is enough for China and it should use the other $2 trillion for foreign investment, he said.
• China should buy exploration rights for energy and resources and make more acquisitions overseas, he said.
• China should set up processing-trade zones overseas which could spur exports of parts and raw materials, he said.

This makes sense but keeping the Yuan artificially low to create the trade that then builds up these reserves strikes me as a little unbalanced. China needs to be letting the Yuan appreciate at a faster pace to fight off the obvious fear and reticence that is going to happen when they start buying companies and resource exploitation rights in other nations. 

www.twitter.com/gregorymckenna

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