China's forex reserves top $2.13t by end of June

China Daily ^ | July 15, 2009

[Oldeconomybuyer]

China's foreign exchange reserves topped $2.13 trillion by the end of June, up 17.84 percent year on year, the People's Bank of China said Wednesday.

The stockpile was increased by $42.1 billion in June, $30.2 billion more than the same time a year earlier.

Declining exports drove down the trade surplus to $96.94 billion in the first half, down 1.3 percent year on year.

A decline of the greenback also helped depress the reserves value as a big share of the holdings were US treasury bills.

[ClearCase_guy]

I once saw a chart showing the level of Gold Reserves held by various countries before and after WWI. In 1914, England, France, Germany, and Russia had a lot of gold. The US had a fair amount, but nothing special. After WWI is appearred that all the world's gold reserves had taken up residence within the US. Pretty amazing. This is one reason why the 20th is called The American Century.

The world doesn't operate off a gold standard anymore, but it sure looks like China has sucked up the equivalent. Not so good for us.

[sanchmo]

Lots of related articles about this today. See also these excerpts:

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/07/how_long_will_china_finance_am.html
** A recent speech by Zhou Xiaochuan, the governor of the Chinese central bank, conceded - in a slightly elliptical way - that China would have to lend more to the US, to see it through the current economic and financial crisis. He said: “in the short run, the US may need more capital inflows to deal with the financial crisis”. So China will continue to fund the growing gap between America’s public expenditure and its tax revenues, by recycling to the US the cash of overseas investors who prefer to invest in China’s real assets. Mr Zhou is clear that allowing America to live beyond its means is profoundly unhealthy for the global economy in the long term. As he said: “over the long run, large capital inflows are not in its best interest of making adjustments to its economic growth model”. **

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahePrYjV6gIY
** Central bank Governor Zhou Xiaochuan ruled out any sudden change in the management of the reserves last month after proposing that governments investigate setting up a supranational currency. Premier Wen Jiabao said in March that he was “worried” about the safety of the nation’s U.S. assets. China holds $763.5 billion of Treasuries. “It’s inevitable that China will continue investing in Treasuries because of the sheer scale of its reserves,” said Ken Peng, an economist with Citigroup Inc. in Beijing. “Diversification will happen at a slow pace, with commodities the favored alternative.” **

[sanchmo]

And the reason the US sucked up so much gold in the first half of the 20th Century is because it was a net exporter and a net lender to the previous source of the world financial system’s currency of choice - the UK pound sterling.

I can’t say that there are parallels between today’s China and the US in the early 20th Century, because China is still extremely undeveloped. But there are strong parallels between where the US is today and the decline of the UK from the top of the world’s financial, economic and monetary pyramid.