CHINA NOT A LIMITLESS SPONGE FOR U.S. DEBT
Growth of Chinese forex reserves slows at a time when Washington needs Beijing to buy Treasuries more than ever.
Growth of Chinese forex reserves slows at a time when Washington needs Beijing to buy Treasuries more than ever.
Tina Wang
Forbes, January 19, 2009
In the past few years, the ballooning of China's foreign-exchange reserves seemed a given, the yin to the yang of rising U.S. debt. But growth of the country's forex reserves slowed last year for the first time in nearly a decade, leading many to wonder if Beijing will slow its Treasury purchases as the U.S. government seeks to ramp up debt issuance to fund stimulus spending.
China's forex reserves climbed 27.3% in 2008, to $1.9 trillion, down sharply from growth of 43.3% in 2007, based on central bank figures quoted by state news agency Xinhua last week. The Xinhua report attributed the yearly slowdown--the country's first since 2000--to shrinking trade surplus, an outflow of speculative capital and plunging foreign direct investment.
The country's forex reserves actually diminished in October, for the first time since 2003, plunging by $25.9 billion, even as China's trade surplus reached the third-highest level on record that same month. (See "China's Disquieting Trade Surplus.") Forex reserves grew by only $5.0 billion in November and $61.3 billion in December, when the trade surplus hit its second-highest level ever because imports fell faster than exports. This implies the capital account is the primary contributor to the slowdown in reserve accumulations.
Forbes, January 19, 2009
In the past few years, the ballooning of China's foreign-exchange reserves seemed a given, the yin to the yang of rising U.S. debt. But growth of the country's forex reserves slowed last year for the first time in nearly a decade, leading many to wonder if Beijing will slow its Treasury purchases as the U.S. government seeks to ramp up debt issuance to fund stimulus spending.
China's forex reserves climbed 27.3% in 2008, to $1.9 trillion, down sharply from growth of 43.3% in 2007, based on central bank figures quoted by state news agency Xinhua last week. The Xinhua report attributed the yearly slowdown--the country's first since 2000--to shrinking trade surplus, an outflow of speculative capital and plunging foreign direct investment.
The country's forex reserves actually diminished in October, for the first time since 2003, plunging by $25.9 billion, even as China's trade surplus reached the third-highest level on record that same month. (See "China's Disquieting Trade Surplus.") Forex reserves grew by only $5.0 billion in November and $61.3 billion in December, when the trade surplus hit its second-highest level ever because imports fell faster than exports. This implies the capital account is the primary contributor to the slowdown in reserve accumulations.
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