How does China’s increasing foreign-exchange reserves impact the market?
By Daniel at 14 July, 2009, 9:37 pm
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“July 15 (Bloomberg) — China’s foreign-exchange reserves topped $2 trillion for the first time, highlighting the difficulty the government faces in finding places to invest the world’s largest holdings.
The reserves rose a record $178 billion in the second quarter to $2.132 trillion, the People’s Bank of China said today on its Web site. That compares with a $7.7 billion gain in the previous three months. ” –Bloomberg.com
Instead uploading the dollars or other currency, the world largest currency holder keep buying. China tops record $2 trillion in reserves for the first time.
What are the intentions China keep stockpiling it’s reserves?
* Driving up the demand for foreign currencies to keep it’s Yuan low in value to protect it’s exports.
* Doing Goldman Sachs to manipulate the currency market to profit from it. Since you are the biggest player in game, playing the market never been easier. Look at GS as an classic example, just exceeds it’s quarterly earning forecast.
* Diversification. While China have to continuous buying up U.S treasury, it needs to buy something else to lower the risk from USD.
* Prepare for the 2nd wave of commodity stockpiling. As recovery remain unclear, IMF may possibly to unload it’s gold reserves to boost it’s cash for the operation. China may never miss that chance. Previously, China and India bought most of those golds IMF unloaded.
* Continuously stockpiling it’s oil reserve.
* Protect (or delay) world currency collapse. In every economic downturn, every countries will print a huge portion of it’s currency to heat up the economy. Supply will increase, world needs buyers to buy up those paper in the market. Yes, China will have to be the buyer, because it holds the most reserves as an investment, to protect it’s reserve in value, it needs to buy up. Don’t take this as an disadvantage, because once global economy in recovery, China will be the biggest benefactor from that.
How does China’s increasing foreign-exchange reserves impact the market?
Positives more than negatives. Buying up the papers people print, U.S couldn’t be more happier. The more China bought, the more the Fed can print, with less inflationary concern. This is the worst recession since 1929 great depression. This downturn is going to wipe a lot of assets, equity. In other side, China is taking the opportunity to buy up the good stuff, as recession is over, China is just sit there to thank the huge interest payment from the U.S. It’s a double lose for U.S and other countries.
That’s not it, China gaining power from it’s increasing reserve and have more influence to the world. By proposing a new world currency, replacing dollar as primary world currency will make next recession easier for developing countries like India and China.
China is just like Goldman Sachs, it’s not stupid, it is meaner than you thought. As everyone is posting loss in this quarter, GS post it’s unbelievable exceeding earning by the profits over others’ misery.
China can make a fortune on trading currency, so you can. You can register at Easy Forex and start trading. Timing couldn’t be more better.
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