Thursday, October 15, 2009

China Foreign Reserves Continue to Surge Ever Higher: $2.27 Trillion

Ding ding... more US treasure deposited into China's coffers. A new record. Hope they don't actually expect to collect on this.

(snickers are heard throughout the crowd)

  • China’s foreign-exchange reserves, the world’s biggest, surged as an economic recovery attracted speculative capital and a weak dollar boosted valuations of its yen and euro assets.
  • The holdings climbed about $141 billion in the third quarter to a record $2.273 trillion, the People’s Bank of China said today on its Web site. That was less than the unprecedented $178 billion gain in the second quarter.
  • The dollar’s decline this year has boosted China’s reserves by increasing the value of holdings of euro and yen assets. A trade surplus added $15.7 billion to the holdings in August and direct investment from abroad contributed $7.5 billion.
  • The inflows of capital may add pressure for asset and consumer prices to rise, complicating management of the economy as a “moderately loose” monetary policy helps to drive the nation’s rebound from the deepest slump in almost a decade.
  • The $141 billion increase in reserves in the third quarter was substantially larger than China's trade surplus for the quarter of $39.27 billion. Such a gap is usually taken as an indication that money also is coming in from other sources.
  • China's central bank adds to the reserves when it buys up foreign currency coming into the country -- either as export earnings or investment flows -- in exchange for the local currency, the yuan. Because China reliably runs a trade surplus and keeps its currency largely fixed against the U.S. dollar, the reserves have grown steadily.
  • Bigger reserves may sustain China’s demand for Treasuries, helping the Obama administration to make record debt sales to fund stimulus spending to revive economic growth. (yes! always a silver lining!)

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012