China proposes dumping $2 Trillion US dollars

Big international news on this Easter Sunday.

Last Friday, deep in the body of the post on Silver, I mentioned that mainstream media had been slow to comment on the latest statement from the Peoples Bank of China (PBoC) wherein China's central bank Governor Zhou Xiaochuan spoke of the need to reduce foreign-reserves.

After a speech at Tsinghua University in Beijing on Wednesday, Zhou spoke of the need to reduce an excessive accumulation of foreign-reserves as those 'reserves' have exceeded a “reasonable” level and the management and diversification of the holdings should be improved.

This is the way you diplomatically say “we are sick of the US Dollar and will be taking steps to lower our holdings.”

Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).  At the same time China (along with Russia) has started to trade in their own currencies, NOT the US Dollar.

When you add in the numerous warnings Chinese politicians have been issuing to the US over the last 24 months, Zhou's statement last week makes it very clear that China is done playing nice and is now actively moving out of US Dollar denominated assets.

Well... today we found out just how much China feels they need to 'reduce'.

China is proposing to cut two thirds of it's $3 Trillion in US dollar holdings.

The $2 Trillion China proposes to dump is equal to the amount of dollars the US Federal Reserve has been printing during QE.

• China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.
• The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.
• Tang's remarks echoed the stance of Zhou Xiaochuan, governor of China's central bank, who said on Monday that China's foreign exchange reserves "exceed our reasonable requirement" and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.
• Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.
• However, these strategies can only treat the symptoms but not the root cause, he said, noting that the key is to reform the mechanism of how the reserves are generated and managed.

This is huge news.

It brings to mind this highly sensationalized, fictitious account of how a US dollar collapse might play out.

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