China’s Foreign Exchange ‘Worry’Posted: December 1, 2016
I still remember well the years before Deng’s reform when even people in shanghai, the largest city in China, lacked food. Every year in broad bean season, as Shanghai people liked broad bean, and there was no control of broad bean supply, there was often too great a supply of broad beans so that in order to prevent broad beans from spoiling, market staff sent broad beans to residential areas to sell them.
Lots of my neighbors would come out to buy. Some would ask if the beans were local or non-local products.
Local beans tasted much better than non-local ones. People were certainly concerned that the dishes they made from the beans would not be their favorite if they bought non-local products.
Others, however, simply did not care. Local or non-local, as long as they may enable us to eat to our fill, they would say.
Limited supply of food grain and pork were controlled by coupons. Chicken, fish and most other foodstuff were in short supply. Quite a lot of them were exported for foreign exchange to enable China to import materials for its industry especially goods for China’s defense. I wonder whether people knew that China was so poor at that time so that they believe that China is worried that it has too much foreign exchange reserve.
Rich people certainly have their worry as they have to manage their wealth satisfactorily to maintain its value, but it’s much better than being poor and worry everyday for their daily supply of food and other necessities.
So is a country. It has to worry about the way to manage its huge foreign exchange reserve when it is rich, but it’s much better than it being poor and having to export its people’s scare food and daily necessities to get much needed foreign exchange.
China has more than enough foreign exchange to import all kind of food from abroad and very expensive advanced weapons such as Su-35 fighter jets and S-400 air defense system from Russia. What SCMP mentions in its report “A US$3 trillion burden or a blessing: Beijing changes its attitude about its forex stockpile” today shows Chinese leaders’ wisdom and vision for better management of China’s huge foreign exchange reserve.
Such reserve is certainly a blessing. It’s a burden on the officials as they have the obligations to manage it satisfactorily. However, it is certainly a blessing for Chinese people. Quite a few ordinary Shanghai people have now begun to know how to enjoy imported sirloin. They need not to know how to tell local broad beans from non-local ones. As there is no demand for non-local broad beans as supplement for food shortage, non-local broad beans simply disappear in fresh vegetable market.
The US does not worry about its huge US dollar debts. Why shall China worry about its huge US dollar reserve?
Comment by Chan Kai Yee on SCMP’s report, full text of which can be found at http://www.scmp.com/news/china/economy/article/2050381/us3-trillion-burden-or-blessing-beijing-changes-its-attitude.