What's with all the moralising? You think China are under some sort of moral obligation to take their losses cause they 'had it coming' for keeping the yuan low? Just like the US they'll do whatever they see is in their advantage. I don't see anyone saying you should feel remorseful but if China want to move towards other currencies then that is their right.
This shouldn't be about "payback". The first post in this thread (kirse) makes a fair statement about China's fixed currency. But does take it too far. Similarly, China not accepting that it is a partner in its situation of the USD is also taking things too far. I think most of this is political response to China's leaders having to answer to its own "middle class" trying to explain what happened to their dream.
It is very true that China would not have its position in the world today if the U.S. had not made credit so cheap to not just U.S. citizens, but the entire world. This is key to understand: the problem with the USD is the world's problem not just Americans. Bankers, traders, homebuyers worldwide benefited from the loose credit policies of the U.S.
Mr. Zhou's statements on changing the system are worth looking into. But keep in mind that there were many smart economists that studied the current set of rules for decades prior to loosening U.S. banking regulations and most of them thought it would work...they were wrong. I'm sure if we jumped into Mr. Zhou's "new IMF system" that in 40 years, there would be externalities we could not have predicted.
I don't think morals have to enter into it. If a country artificially ties its currency to the dollar for purposes of inflating trade, it's going to end up with a bunch of dollars that aren't worth so much.
Seems like natural consequences to me.
I'm dubious that the system is so simple that simply changing the reserve currency is going to fix anything. But if I were an expert in international finance, I wouldn't be working on startups. And I'd probably be a lot more boring.
I agree the Chinese are in a bit of a pickle what with holding so many US dollars. The fact that they are prepared to risk their investment by saying this is suggestive. In the end I think the US would still like to hold onto the USD as the defacto world currency and the Chinese move is more a warning that that this can be lost if the value drops too much.
Either way I'm not sure how much it matters who's 'fault' it was now.
But I'm not an expert in international finance either. The startup I'm a part of does very well when the USD is strong but that is about it.
