The only rational strategy for China would have been buying as much Brazil and Russia as their goverments would
have allowed, to hedge their commodity exposure instead of pouring money into US debt.

Me thinks they are a bit to late now with the equity bull market in EM going on for many years, but still it’s
a better investment that gt10 at 4.3%…

where interests coincide – conspiracy is totally redundant. will there be a conspiracy between wall street and the chinese sovereign wealth investment managers ? no, because they won’t need one.
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Get yourself a real job

I do think that exchange rates are going to be signficantly liberalized in the next year or so, because I don’t see how any of these flows are going to work in a system of pegged or even semi-pegged exchange rates.

The other thing that I got from the conference was how close the cooperation is between Hong Kong and mainland markets. One of the medium term goals of the PRC government seems to be to have Hong Kong displace Tokyo as the center for finance in the “third time zone” as well as to tap into the financial expertise that exists there. One interesting part of this is that one of the goals of Hong Kong appears to be to become a center for Islamic finance which ties into a lot of the themes in this post.

About currency revaluation….. There was a mid-level official from the PRC who gave a talk. He didn’t answer any questions about currency valuation directly, but he did say to read Hu Jintao’s remarks at the party congress in the original Chinese, and that “interesting things are about to happen.”

It was also curious to hear a talk from someone that worked in the Treasury during the mid-1990′s and to hear first hand what they said happened and the relevance to China. Far from trying to destroy East Asian economies, that person said that Treasury and the IMF were trying hard to pump money into the southeast Asia during the crisis, but they were just overwhelmed by the scale of the capital flows.

The final thing about the conference was that it would have been a playground for conspiracy theorists. You had people from the Council of Foreign Relations, Wall Street bankers, ex-officials from the US Treasury Department, officials from the Chinese government, and the heads of some of the Chinese mutual funds all in one room. One point that the PRC official made was that he travelled all the way from China to give a twenty minute talk because the people in the audience, who were a sample of Chinese people who work in Wall Street finance were the precisely people who are going to be making the big decisions in the future.

Yes there is a vast conspiracy. I’ve seen it. I’m actually part of it. Care to join in?

2fish — your point rings true, but the relative scale of foreign assets held outside of safe will change with the cic.

It’s not a matter of the US permitting anything. Prices on all major commodities (oil, gold, platinum, palladium) are denominated in dollars. The fact that something is denominated in dollars doesn’t mean that someone will take only dollars. If you want to pay euros for oil, there are lots of people that would be happy to sell it to you.

This isn’t true. SAFE administrates PRC currency policy, but it has never had authority over Citic, CDB, or the state oil companies or their offshore dollar holdings. SAFE reports to the PBC, but Huijin reported to the Ministry of Finance.