Money's not worth paper it's printed on, China Investment Corp. exec says
China Investment Head Gao Says Quantitative Easing Devaluing Paper Money

By Simon Kennedy
Bloomberg News
Thursday, January 27, 2011

DAVOS, Switzerland -- China Investment Corp. Vice Chairman Gao Xiqing said that central banks' quantitative easing policies are hurting the value of money, one day after the Federal Reserve maintained plans to buy $600 billion of Treasuries.

"You know money is gradually becoming not worth the paper it's printed on," Gao said at an event sponsored today by HSBC Holdings Plc at the World Economic Forum in Davos. Recent gains in commodity and food prices reflect the "long-term view" of investors that prices will accelerate, he said.

The Fed and the European Central Bank have kept their benchmark interest rates at record lows to spur their economic recoveries, triggering concern in emerging markets that the resulting flood of capital will undermine currencies such as the dollar and spark inflation.

"We've started collecting Zimbabwe notes," Gao said, referring to an economy whose currency was scrapped in 2009 after inflation reached 500 billion percent. He noted investors are also discussing whether central banks will pursue more rounds of quantitative easing.

The Fed yesterday reiterated its intention to keep its benchmark "exceptionally low."

Gao, whose sovereign wealth fund manages about $300 billion, signaled that while industrial nations are now more welcoming of China's money following the financial crisis, their past criticisms may hurt their ability to attract it.

"People have long memories," he said. "We have this yo yo when being treated by a few major countries. In many countries we are now treated differently. We should be the most welcome investor."