Monday April 21, 2008

China's currency reserves climb 40% to $1.68 trillion

bloomberg.com :

China's foreign-exchange reserves, the world's largest, surged to $1.68 trillion at the end of March, adding pressure on the government to prevent money inflows from fueling inflation already at an 11-year high. Currency holdings expanded 40% from a year earlier, the People's Bank of China said today [11 Apr 2008] on its Web site.

Exports, foreign investment and U.S. dollar depreciation have boosted China's currency assets, hampering government efforts to rein in money supply and inflation. Consumer prices surged 8.7% in February from a year earlier, the most since May 1996. Growing reserves prompted the government to set up an investment arm last year to increase returns. China Investment Corp., a $200 billion fund, bought stakes in Blackstone Group LP, the New York-based private equity firm, and Morgan Stanley.

- It's fair to say that the Chinese are positively inundated with US dollars. It's a tremendous amount of money and it's growing rapidly. They are starting to use some of these dollars to purchase commodities and to sign lock-up arrangements with natural resource producers. While the financial markets are looking at multi-hundred billion dollar writedowns, the holders of US dollar reserves are looking at making multi-hundred billion dollar investments into commodities. So, go short financials and go long commodities.

See also :

1. China inflation surges to 8.7% in Feb 2008, highest in 11 years
2. Cashed-up China set to hunt down more US bargains
3. China's finance ministry to soon issue US$200b in bonds
4. China signals reserves switch away from dollar
5. Chinese personal savings hit 14t yuan

(2008-04-21 13:10:39 SGT) [Biz] Permalink Comments [2]

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