In light of the weight many folks are placing on the course of Asian central bank policy in determining whether the immediate future is bright or bleak for the U.S., I found this report, from The Wall Street Journal Online, interesting:
A woman who has consistently called for overhaul of China's capital controls -- although not adjustment in the yuan's exchange rate -- was named to head the agency that carries out the country's currency policy.
Hu Xiaolian moves to the State Administration of Foreign Exchange [SAFE] from China's central bank, where she had been one of three deputies to central bank Gov. Zhou Xiaochuan since August...
In public comments, English-speaking Ms. Hu has said repeatedly that China needs to adjust the controls on its currency to better reflect supply and demand. A fixed exchange rate such as that which China has had since 1994 leads to economic distortions, she has said, while stopping short of saying the exchange rate itself should be adjusted. Instead, as she did in a 2002 speech in New York, Ms. Hu has said rule changes on who can buy or sell yuan are a way that China's currency policy can be made to "reflect the changing world."
That certainly sounds like a change's a'coming, but then there was this...
On managing China's reserves, Ms. Hu has suggested in the past a bias for holding U.S. dollars. She said in the 1990s that China held large amounts of U.S. dollars as a backing to its weak banking system. As recently as 2001, she said holding euros didn't make sense for China because most of its trade with Europe is denominated in dollars.
and this...
Meanwhile, a Chinese media report yesterday said growth in the reserves that SAFE manages has slowed. The China Business News reported that reserves were valued at $642.6 billion at the end of February, as $32.7 billion was added during the first two months of 2005 combined. Reserves grew at a far faster rate in 2004, with the monthly increase averaging $34.5 billion. A SAFE representative told Dow Jones Newswires that first-quarter data are to be unveiled in mid-April.
Put it all together, I'm not sure what it means. (I'll resist the temptation to say "Hu knows.") But we'll keep watching.