a swelling trade surplus that has deluged the country with dollars. Normally this dollar excess would bid up the renminbi but, to keep the value of China ’ s currency stable, the central bank has bought virtually all the incoming foreign currency and managed the money on its own balance sheet.” Source: “ The trillion dollar question: China is grappling with how to deploy its foreign exchange riches ” , Financial Times , September 25, 2006
24/02/18 48 2-95 China ’ s fx reserves - 2006 Source: “ The trillion dollar question: China is grappling with how to deploy its foreign exchange riches ” , Financial Times, September 25, 2006 2-96 China ’ s fx reserves - 2006 Source: Financial Times, May 30, 2007
24/02/18 49 2-97 BOP accounts of CN credit (+) transactions resulting in receipts from foreigners debit (-) transactions resulting in payments to foreigners N O N Current account exports imports C B s Nonreserve financial account • ’ exports ’ of CN assets • increase in foreign-owned CN assets • ’ imports ’ of foreign assets • increase in CN-owned foreign assets OFFICIAL SETTLEMENTS BALANCE = BOP C B s Official reserve transactions increase in foreign-owned official reserve assets increase in CN-owned official reserve assets BALANCE OF OFFICIAL RESERVE TRANSACTIONS 2-98 China ’ s fx reserves - 2009 "China's foreign assets … real figure at nearer $2,300bn - equivalent to more than $1,600 for every Chinese citizen. From that total, Mr Setser calculates that about $1,700bn is invested in dollar assets , making the Chinese government by far the largest creditor of the US. Last year, when its economy was under extreme stress, China lent the US more than $400bn - equivalent to more than 10 per cent of Chinese gross domestic product. "Day after day, China is the single biggest buyer of Treasury bonds in the market," he wrote in a recent report. "Never before has the US relied so heavily on another country's government for financing." Source: "China's dollar dilemma", Financial Times , February 23, 2009
24/02/18 50 2-99 China ’ s dilemma - 2011 “ Why has China, in particular, purchased vast quantities of debt from a country whose policies it distrusts – more than $2,000 for every Chinese and some 50 per cent of gross domestic product ? The answer is that this is the by-product of efforts to keep the currency down and exports competitive. It is no longer, if it ever was, the product of an effort to purchase insurance: the risks to Chinese wealth created by its huge reserves are surely greater than any insurance benefits ” . Source: Wolf, M., “ Why China hates loving the dollar ” , Financial Times , January 26, 2011 2-100 China ’ s current account balance - 2014 Source: “ Investors take a pace back from renminbi ” , Financial Times , March 18, 2014 • “ Having peaked at over 10% of GDP in 2007, the surplus narrowed to just over 2% of GDP ($189 billion) last year,… ” • growth in reserves has slowed down
24/02/18 51 2-101 China ’ s fx reserves - 2017 • “China’s reserves peaked at $3.99tn in June 2014 but since then the central bank has sold dollars aggressively to curb renminbi depreciation.”
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