Question

What is the role of China in Dollar valuation

Answer 1

1. As of May 2011 the largest single holder of U.S. government debt was China, with 26 percent of all foreign-held U.S. Treasury securities (debt).

2. China is looking for new international currency, due to the large amount of Us debt and the US credit downgrade by S&P to AA from AAA. This threatens the strength of the dollar.

3.when a country exports more than it imports (trade surplus) it has a strong currency, look at Australia exporting raw materials to china. The other way round when a country imports more than it exports (trade deficit) it has a weakening effect. The US imports more house hold cheap goods from China than it exports to China, therefore a Chinese trade deffiect will weaken the dollar.

4. China undervalues it currency to make these cheap goods artifficeally cheap.

http://en.wikipedia.org/wiki/United_States_public_debt

http://www.futureofuschinatrade.com/sites/default/files/currency-white-paper-english.pdf

http://www.futureofuschinatrade.com/outcomes/who-heck-cares-about-currency-exploring-path-stronger-and-more-sustainable-trade-relationsh

hope this helps...warning im not an economist or chinese!