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China Daily | Updated: 2011-08-25 07:39

Dilemma of yuan revaluation

In the shadow of the United States' sovereign debt crisis, US Vice-President Joe Biden's visit to China was meant to focus on US treasury securities as well as the Chinese currency's exchange rate. It is thus necessary for China to change its attitude toward the United States' economic problems, because if the US Federal Reserve launches the third round of quantitative easing (QE3), the dollar will inevitably fall and cause devaluation of trillions of dollars of the US debt that China holds, apart from giving rise to runaway inflation across the world. The resultant effect would push China's macroeconomic policy environment toward a dilemma, says an article in Shanghai Business. Excerpts:

Since the outbreak of the US debt crisis, Beijing has been urging Washington to shoulder its responsibilities and ensure it does not spill over to the rest of the world. But at the same time, China has shown relatively enough confidence in US Treasuries.

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