Sunday June 08, 2008

China forex reserves hit US$1.76 trillion

channelnewsasia.com :

China's foreign exchange reserves rose to US$1.76 trillion at the end of April [2008], state media reported Monday [2 Jun 2008], reaching a level higher than the rest of Northeast Asia's combined. China's reserves, by far the largest in the world, expanded by another US$74.5 billion during April, the China Business News reported, equivalent to about US$100 million every hour. At US$1.76 trillion, China's reserves are now larger than those of Japan, Taiwan, South Korea and Hong Kong combined.

The growth in reserves came amid rising official concern about a fresh surge in hot money - or speculative inflows - spurred by a strengthening yuan and a widening spread between falling US interest rates and rising Chinese rates. The increase in reserves was roughly three times larger than the trade surplus and the value of incoming foreign direct investment - the two traditional sources of reserve growth.

- Even in a world full of large numbers, $1.76 trillion is a very large number. There are a lot of things they could do with such a huge amount of money - build maglev railways across all of China - that's one. Or they could launch a space-based solar power project and start moving away from fossil fuels. In the meantime, they could lock up the world supply of crude oil for the next 40 years - but of course if they actually tried that, the oil price will quickly go beyond $130,000 per barrel instead of staying at the $130+ level where it is at now.

In fact, a small fraction of that money could be - and is - being spent to lock up supplies of resources and commodities of all kinds. Money sloshing around like this is a huge positive factor for the commodities markets. That's what the contrarians are talking about when they mention things like "unlimited money chasing limited goods". Just watch and observe.

See also :

1. China's currency reserves climb 40% to $1.68 trillion
2. China inflation surges to 8.7% in Feb 2008, highest in 11 years
3. Cashed-up China set to hunt down more US bargains
4. China signals reserves switch away from dollar
5. Chinese personal savings hit 14t yuan

(2008-06-08 17:39:58 SGT) [Biz] Permalink

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