We are in the same boat, we must cooperate. If there’s no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets…

China is very worried about the safety of its assets. If you want China to keep calm, you must ensure China that its assets are safe.

It is not fair that we are doing this in good faith and are prepared to bear serious consequences and you are still labeling China this and that, accusing China of this and that. China knows what to do. We don’t need your intervention.

Why are we piling up these IOUs if they may default? … This is paper and it may default and it will not increase China’s national welfare.

Our export-growth strategy has run its natural course. We should change course.

—Yu Yongding, a former academic member of the central bank’s monetary policy committee and former adviser to the Chinese central bank in an interview in Beijing on Sept. 23.

Paraphrase of Yu from Bloomberg reporting of the interview

China should stop intervening in the foreign currency markets and thus allow rapid appreciation of the yuan, he said. While this would cause pain for exporters, China could ease the transition by using its strong fiscal position to aid those who lose their jobs. It also should stimulate domestic demand to offset lower income from overseas sales.

Treasury Holdings:

  • Asia: $2.67t
  • Japan: $593b
  • China: $519b
    • Export growth has led to the accumulation of $1.81 trillion in FX reserves

“Whether some kind of agreement between them to continue to hold Treasury bills is viable, I’m not sure. It would be unusual. If it became apparent that sovereigns in Asia were selling Treasuries the market would take that quite badly, it’s something to be avoided.”

—James McCormack, head of sovereign ratings at Fitch Ratings, Hong Kong.