China foreign exchange reserves at $1.954 trillion

[G_j]

http://www.boston.com/news/world/asia/articles/2009/04/10/china_foreign_exchange_reserves_at_1954_trillion

China foreign exchange reserves at $1.954 trillion
April 10, 2009

BEIJING—China's central bank says its foreign exchange reserves rose 16 percent year-on-year to $1.954 trillion by the end of March.

In a notice on its Web site Saturday the bank said reserves increased by $7.7 billion in the first quarter, $146.2 billion lower than the same period last year.

Analysts believe China holds up to 70 percent of its foreign reserves in U.S. dollar-denominated assets, including Treasury securities.

In March, the reserves increased by $41.7 billion, an increase $6.7 billion more than the same period last year.

[Avalux]

1. I think I'm going to throw up. n/t

[roamer65]

2. No worries, soon all those reserves will only buy a cheap Chinese-made toaster oven.

After the Federal Reserve debases the dollar. Aren't fiat currencies fun?

[KharmaTrain]

5. Money Doesn't Do Much Good If You Can't Spend It...

The ongoing strength of the Chinese economy depends on other countries...specifically the U.S. to keep on buying and consuming. All those empty barges and the reduced orders by American retailers sure has to be having an impact on the Chinese as without us consuming, their "wealth" can't be sustained. While their own consumer market has grown, it's still not enough to maintain the high level of production that the government encourages...keeping them busy in the factories keeps them off the streets.

Yes...fiat currencies are fun. I recall all the same fears about the Chinese equated to the Japanese in the 80's and we saw how that panned out.

Cheers...

[Deja Q]

7. Or being able to earn it.

[HamdenRice]

10. The Chinese have announced and implemented plans to change their economy

and they have the reserves to do it. Obama seems to have charmed the Chinese premier Hu Jintao at the recent G20, playing deal maker between China and France, on terms that were quite favorable to China.

The best deal that could emerge between the US and China is that China use its enormous reserves to stimulate its own economy and reorient it toward greater internal demand by Chinese consumers. That in turn would stimulate global demand, helping to replace some of the lost US consumer demand. Moreover, China would use its reserves to purchase US goods and services and to recycle those reserves into direct investment in the US.

This is what happened with Japan when it had excess reserves and why those imbalances were not as destructive. But Japan was considered an ally, and there were few restrictions on how Japan recycled its reserves.

The problem during the trade imbalance era was that China had nowhere to spend its reserves. Usually in such a situation if the US has no goods to sell that China wants, China would use the money for direct investment. Since Bush blocked them from making direct investments, they could only make financial investments, in things like T-bills and mortgage backed securities, which in turn helped cause the real estate bubble.

If both countries cooperate, as they have now pledged to do, these reserves could be very helpful to both countries' economies.

[KharmaTrain]

12. Very Well Stated...

Our economies are interdependent. While the Chinese are moving to develop their consumer society as opposed to pouring capital into corporate or state projects (like the Three Gorges Dam) their demand can't offset the American dollar and it will be several years (assuming China's present growth continues) where that'll be the case. So an American recovery means the ongoing growth of Chinese business and industry that builds their consumer market.

One "downside" that the Japanese and even Korean models show is that with the rise in weath a trade imbalance creates it also creates a middle class in those societies that, in time, demand higher wages and a better life. This closes the gaps over time as the wage differential between Americans and Japanese aren't where they once were and if we see history repeat, the same could be said of the Chinese and even the Indians.

While some want to turn back the clocks to a world that isn't global...we are where we are...and have to make the most of it. I see the day coming soon where the dollar and Euro and Yen and other major currencies reach a parity as they'll be so interconnected.

Cheers...

[Bandit]

11. There was a story here a few weeks back about Chinese investors

combing America for real estate deals and buying up as much as possible. In this Global Economy it really is not that hard to spend money if you have any..Things are very cheap about now..

[RB TexLa]

3. Which is part of the reason SDR are going to replace the dollar as the global currency

There is no reason for everyone else to be subject to effects on a single currency. The US still makes up 40% of the IMF's SDR. So it's a drop of 20% from most estimates of current reserves. It however is still a large percentage.

[Deja Q]

6. Hasn't happened yet.

[RB TexLa]

8. Not a quick process.

[G_j]

4. ==

[DFW]

9. I wonder if they'd take Mississippi and Alabama as collateral?