Bloomberg Misses Real Story on Latest Official Chinese Comments on Dollar

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Lordie, is the media incapable of doing anything more than writing up official remarks?

This is the latest headline, the lead story on the Bloomberg home page right now:

Dollar Gains as China Says ‘Not Aware’ of Reserve Currency Talk

That is a very curious remark, given that the central bank, a mere week ago, issued a report that advocated that the IMF establish a reserve currency “delnked from sovereign nations” to help countries like China have someplace other than the dollar for parking their FX reserves. And this wasn’t the first time China has made noises like that either.

So what is this weird Bloomberg story about? It’s bureaucratic infighting gone public. We wrote back in 2008 that the foreign minsitry and the central bank are at loggerheads about the dollar. The central bank accepts that the renmimbi must rise and China needs to move to a consumer-led economy, but the foreign ministry has the opposite view and wants to keep the Chinese currency cheap.

But even though Bloomberg reported on the central bank’s report and some follow up remarks a few days ago clarifying its positon, the story today gives no clue that the remarks out of China appear schizophrenic (unless one has been paying attention) and are from different parts of the officialdom.

From Bloomberg:

The dollar rose from a three-week low against the euro and erased losses versus the yen after a Chinese official said he was “not aware” of a plan to discuss a new reserve currency at a Group of Eight meeting next week.

The greenback also gained versus 14 of the 16 major currencies after Chinese Vice Foreign Minister He Yafei said he hopes the dollar will “remain stable,” easing concern it will lose its reserve status.

Four paragraphs later, we get this:

Chinese officials have sought a greater role over time for the International Monetary Fund’s unit of account, known as Special Drawing Rights, or SDRs, in an effort to reduce the dollar’s dominance.

So the contradiction is downplayed, and there is no indication that the various officials represent different bodies.

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  1. Hugh

    Bloomberg has some good stuff but not a lot of quality control.

    I was wondering if you had seen this post about the Treasury's selling of warrants. Perhaps it is just me, but it seemed a fairly loopy approach. I don't know enough about the process to evaluate it though in any detailed way.

  2. Brick

    Yes I think you are right that the foreign ministry and the central bank don't agree, but I notice the terminology used. The Foreign Minister hoping the dollar remains stable seems sensible considering their reserves, but that is not quite the same as saying that we will not explore alternatives. It does not help of course that the foreign ministers actual words have been somewhat truncated again by Bloomberg for which we have the china daily news to thank for the actual quote. "He said that Beijing hoped the dollar, the main global reserve currency remained stable but added that China "of course" hoped for reserve currency diversification in the future."
    Now while there is some very good reporting done at Bloomberg this kind of reporting might lead to legal action in Europe.

    The treasury warrants announcement is interesting and I notice that it says.
    "If an issuer chooses not to repurchase the warrants according to its existing contractual rights, Treasury has the discretion to dispose of the warrants as it sees fit over time. In these instances, Treasury will sell the warrants through an auction process over the next few months."
    I guess this is a message to Citibank that if they want to pay big bonuses they had better repay the taxpayer first. I expect the likes of Citibank shares to come under pressure once those auctions take place and I am not sure whether that could be the last straw for them. As with everything else I expect this to be watered down so the auctions will take place sometime/never.

  3. In Debt We Trust

    You are absolutely on pt about an internal debate being made public for domestic audiences. There is a power struggle going on in the PRC.

  4. cindy

    The foreign ministry deals w/ foreign affairs and has no jurisdiction over economic policies. Perhaps it's the finance ministry?

    Everybody likes to be a China commentator these days but most have no idea what they're talking about.

  5. Jr Deputy Accountant

    I have noticed a similar pattern not just over at Bloomberg… as if the media outlets are scrambling to write this phony story so hard that they can't even keep track of their own comments from minute to minute. MarketWatch had three contradictory updates this morning within a 15 minute timeframe on gold, Treasury yields, and job data that didn't even make sense.

    Call it "the wheels falling off" the media machine.

  6. Greg Hall

    The Chinese are watching and waiting to see if we melt down. That said, they have A LOT of problems in their own yard.

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