Chinese Holdings Prop Up Dollar
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The Chinese central bank had $854B in foreign currency and gold reserves at the end of last month, the state-owned China Business News reported yesterday.
The bank’s mix of holdings is a closely guarded secret but most analysts believe that roughly 80% is held in dollars, much in the form of Treasury bonds and other top-grade dollar instruments.
China is the biggest foreign buyer of American government bonds, holding a huge chunk of America’s outstanding national debt. It is effectively propping up the dollar and thus the American economy. Any major shift to other forms of reserves would have a dramatic effect on the global currency and asset markets.
