Crocodilian

China Wants More Talk About the U.S. Dollar

author writes:
"Fourth, we are struck by the gap between China's declaratory policy--what they say--and their operational policy--what they do. What they say sounds like they want to end the dollar's role as the numeraire. What they do is accumulate dollars and Treasuries, with some officials acknowledging they have no choice."
----------------------...

And how. The Chinese want to keep their currency cheap, so that they can dominate export markets, and at the same time, don't want to accept the financial consequences of their exchange rate preference.

If one "lets the chips fall where they may", China's currency would appreciate, US would export more, China would export less. Chinese leaders are quite comfortable with US unemployment, but are less cheerful about the prospect of Chinese unemployment.

They can't have it both ways. The price of full employment in China is to sit on a pile of dollars.