Comments on Yu Yongding "China’s rebalancing act: between exports and domestic demand", 25/10/2012, http://www.eastasiaforum.org/2012/10/24/chinas-rebalancing-act-between-exports-and-domestic-demand/
I don’t have a problem with a fall, a rise or no change in the ratio of trade to GDP in China. However, I cannot see why it is necessarily that being a large net creditor means being in the worst position in today’s global economy when faced with ‘infinite quantitative easing’.
The question is how to use that credit. It does not necessarily have to be used in holding US government bonds. The US stock market has boomed following the QEs. The US housing market is still low and there are values there. A move from government bonds to equities would not only keep the value of credits, but also increase its value.
And it is not necessary for all those reserves to be held in government hands. Why not transfer some to private holders?
It is not the credits but only the limitations of fixed thinking that is the problem for China.