1.0096 trillion dollars
I guess it is close to official. China’s reserves topped $1 trillion (see the Bank of New York as well). China added $21.7b to their reserves in October, bringing their reserves to $1,009.6 billion. The October increase is a bit low, given China’s almost $24b October trade surplus. “Private” Chinese debt purchases seem to be continuing.
No Responses to “1.0096 trillion dollars”
Gheorghius • November 16th, 2006 at 4:19 pm
Their problems in controlling domestic aggregate demand, & monetary conditions, seem to grow… ?!?
Dave Chiang • November 16th, 2006 at 4:23 pm
Hi Brad,
There is nothing wrong with Chinese saving their hard earned US dollars from the export of consumer products. The real problem is that American monetary policy is out of control. What the Americans have done is that they have simply abolished savings. And that means that more and more of GDP goes into consumption at the expense of investment and at the expense of the trade balance. The key preposterous fallacy in America today is the mainstream Economist idea that everything good comes from consumer spending.
Regards,
bsetser • November 16th, 2006 at 4:24 pm
well, fixed investment has come down, judging from the october data. The problem is that every time china restrains investment growth with administrative measures, its trade/ current account surplus soars …
bsetser • November 16th, 2006 at 4:25 pm
DC — US monetary policy isn’t as loose as it once was. And low rates are generally considered a stimulus to investment as much as consumption.
Rabkenen • November 16th, 2006 at 4:33 pm
Brad-
Get ready for 2 trillion reserves.
China’s most recent export is low fx volatility.
We are back to 1971 its $ glut and its conundrum.
From 1968 to 1971 Japan reserves quintupled. sic.
Guest • November 16th, 2006 at 7:43 pm
Brad: Is there any point to speculating what the situation would be if/when China holds TWO trillion in US debt? THREE trillion? This seems the direction of things at present. Perhaps a thought experiment on what might happen in these cases could help tell us when this accumulation will stop.
RN • November 16th, 2006 at 11:01 pm
Dave Chiang,
I for one am fed up with your one-sided myopic opinions.
What China is doing is not only bad economics, but immoral.
They have a nation of a billion plus people, many of whom barely get enough to eat, who have no decent health care, no social safety nets of any kind. Many Chinese work in abhorrent conditions for subsistence wages while a billion dollars gets dropped into reserves every month.
It’s time for China to do the moral thing and start using its inflows to raise the standard of living for more of its people. It’s not only the right thing to do economically for itself and for the global economy, it’s the moral thing to do.
HK • November 16th, 2006 at 11:48 pm
Brad–I am back from Europe. Europeans are talking about climate change (Stern report), global imbalances, and China’s agressive investment and lending in Africa. All are related to China. Like us, they are obsessed by China.
So, China’s foreign exchange reserves reached $1 trillion. They could reach $2 trillion in four years, given the current trend of $250 billion or more annual increase. What would happen then? My hope is that before their reserves reach $2 trillion, the renminbi be appreciated and macroeconomic policy be realigned so that constant currency market intervention would not be needed. The best is China’s voluntary decision to do so, but that is unlikely. The second best would be the international community, led by the IMF, exerting peer pressure on China to do so, but this is also inlikely to succeed. Most likely appears to be either US protectionism or financial market pressure forcing China to do something.
LC • November 17th, 2006 at 12:57 pm
RN:
Things aren’t simple as they look. I would suggest you read some of McKinnon’s work on the East Asian reserve situation, where he discussed the concept of conflicted virtue. Simply put, in a system where a country trying to increase its productivity but can’t price goods in its own currency, ends up with a current account surplus. Though I don’t agree with all its points, it does bring some interesting insight into why the situation developed. Also, developing a social safety net takes time. Just look at US. How long did it take to develop universal healthcare? I don’t know all the answers, but I do know that putting things into simple “moral” or “immoral” terms and looking for quick fixes get us into more trouble.
