True, and with the trust Zhu Rongji has in Vice Premier Wen Jiabao who many expect to be the likely successor to Zhu Rongji, those policies are likely to continue well into the future. But during this effort to hold down the value of the yuan by the Chinese government, the reserves have swelled. Also, at least in the past, domestic firms were required to sell their hard currencies to Chinese banks resulting in even larger reserves. Typically these reserves are placed in US government securities and as Stiglitz was noting in the article you posted "the United States enjoys access to capital on cheaper terms that allows it to live beyond its means." For China, the return on these US government securities is much lower than the interest rate they pay on their foreign borrowing -- what a net loss! Hello? Stiglitz suggests that the Asian countries pool these reserves. Certainly putting these reserves into more productive uses seems a likely solution.
The dollar-yuan exchange rate is likely to be stable for years to come but I don't know if the same can be said about US-China relations in areas other than nonstrategic based trade -- they seem to be worsening. Nearly all political changes in China are framed in geopolitical terms or as a resurgence of nationalism or whatever and viewed as a threat to US interests. Hello?
Best, Diane
P.S. Your forwarded articles are most interesting to me.