The writer is a senior fellow at the Council on Foreign Relations and a former US Treasury official
China continues to buy US dollars at pace, and it is no doubt amassing additional holdings of foreign securities too. In December, its state banks and central bank bought more than $100bn of foreign exchange in the market. January purchases were only slightly smaller.
If you are only looking at the balance sheet of the People’s Bank of China, this might not have been evident. The formal foreign exchange reserves of China’s central bank have not been rising rapidly, but do not be fooled. The dollars that China Inc bought in the market in the past few months are being warehoused by the country’s big state-owned financial institutions, which added the unprecedented $100bn to foreign assets in December and another $70bn in January.