FT.com / China - China has long way to go to dislodge dollar

FT.com / China - China has long way to go to dislodge dollar: "Why is a country that is still poor, people are increasingly asking, lending so much money to a rich country – especially when officials warn constantly about a possible slump in the dollar. Beijing has also reacted angrily to anyone who suggests its huge build-up in foreign currency reserves contributed to the orgy of liquidity in global financial markets.

Some of the outrage is understandable – who does not believe that profligacy in the US was at the heart of the crisis? Yet China’s huge exposure to the dollar is partly a trap of its own making.

If the Chinese currency had appreciated more rapidly in recent years, the economy might not have experienced such turbo-charged growth rates – but its reserves would not have exploded so quickly and the much-needed shift to domestic demand would be more advanced.

It is all very well for Beijing to criticise irresponsible behaviour in the US, but for China to run a current account surplus of 8-9 per cent of gross domestic product, as it has been doing, someone on the other side of the ledger must be running big deficits."