Before the global financial crisis hit, critics of China's economic imbalances - its twin fiscal and trade surpluses - mainly concentrated on the misallocation of resources that occurs when less-developed countries borrow from richer countries at high interest rates and lend the money to them at low interest rates.

The great irony of the financial crisis is that the situation has actually become worse, not better.

China's foreign-exchange reserves, indeed, are facing a triple whammy: a decline in the US dollar's purchasing power, a fall in the prices of US government securities, and possible inflation in the longer run.