32 C
June 24, 2021

China reserves may buy world’s gold twice

China’s foreign reserves surpassed the value of all official bullion holdings in January 2004 and rose to USD 3.3 trillion at the end of 2012, according to Bloomberg, antena3.ro quotes. China’s reserves rose 721 per cent through 2012. Dollars brought into China are sold to banks, which in turn sell the greenbacks to the central bank, increasing the reserves. That process has been fueled by trade, with China exceeding Germany to be the world’s largest exporter in 2009. The size of the reserves means the government can’t make major adjustments to its holdings on the open market, according to Mirae Asset Financial Group’s Joy Yang. “China’s foreign-exchange reserves are a blessing in bad days but a curse in good days,” said Yang, Mirae’s Hong Kong- based chief Greater China economist, who has previously worked for the IMF.About two-thirds of China’s assets are dollar-denominated and another quarter is in euros, according to Yao Wei, a Hong Kong-based economist at Societe Generale SA. China is now encouraging companies and residents to keep more foreign currency in a strategy known as “hiding foreign currencies among people,” meaning that the government’s foreign reserves may “gradually fall,” Yang said.

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