China is a hostage. China is America’s bank and America basically says there’s nothing you can do to me. If I go down you don’t get paid.

Andy Xie, former Morgan Stanley’s chief Asia economist.

Chinese officials and academics always felt they had the upper hand psychologically in negotiating with the U.S., as they could easily threaten not to buy U.S. Treasuries any more. Now, that bargaining chip has been taken away. [Reserves] are such a big chunk that it’s too difficult to turn them around.

Chinese leaders are likely to articulate their concern to their U.S. counterparts strongly and ask for specific measures.

Li Xiangyang, Chinese Academy of Social Sciences

Central bank Governor Zhou Xiaochuan yesterday urged the International Monetary Fund to create a “super-sovereign reserve currency.”

Bloomberg

The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies, and gross domestic product may also be included as a weighting

Zhou Xiaochuan, Chinese Central bank Governor on shifting the composition of Special Drawing Rights through the IMF to include more currencies and weight their resepctive share by GDP — perhaps a way toward the super reserve currency and a shift away from the USD

The world economic landscape has been changed since the establishment of the SDR 40 years ago. Specifically, no such reserve currency would make sense without the yuan being included.

Ha Jiming, chief economist at China International Capital

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