China Passes Japan as Second-Largest EconomyBy DAVID BARBOZA
Published: August 15, 2010SHANGHAI — After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.
The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.
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And apparently they have also finally decided to diversify their portfolio...
China Favors Euros Over Dollars as Bernanke Shifts Course on Fed StimulusBy Candice Zachariahs and Ron Harui - Aug 15, 2010 9:36 PM ETChina, whose $2.45 trillion in foreign-exchange reserves are the world’s largest, is turning bullish on Europe and Japan at the expense of the U.S.
The Asian nation has been buying “quite a lot” of European bonds, said Yu Yongding, a former adviser to the People’s Bank of China who was part of a foreign-policy advisory committee that visited France, Spain and Germany from June 20 to July 2. Japan’s Ministry of Finance said Aug. 9 that China bought 1.73 trillion yen ($20.2 billion) more Japanese debt than it sold in the first half of 2010, the fastest pace of purchases in at least five years.
“Diversification should be a basic principle,” Yu said in an interview, adding a “top-level Chinese central banker” told him to convey to European policymakers China’s confidence in the region’s economy and currency. “We didn’t sell any European bonds or assets, instead we bought quite a lot.”
China’s position may make it harder for the greenback to rebound after falling as much as 10 percent from this year’s peak in June as measured by the trade-weighted Dollar Index. The Asian nation cut its holdings of U.S. government debt by $72.2 billion, or 7.7 percent, through May from last year’s record of $939.9 billion in July 2009, according to the Treasury Department, which releases new data today.
