China, which holds the world’s largest foreign exchange reserves, is estimated to have US$1.7 trillion in investments in the United States at the end of last year, including treasuries and equities, a report shows.
The country’s US portfolio holdings equal just under 40 per cent of its gross domestic product, the Council of Foreign Relations’ centre for geo-economic studies said in a recent report.
Authors Brad Setser and Arpana Pandey wrote that China held close to US$900 billion of treasury bonds, including short-term bills, at the end of the fourth quarter. It also owned US$550 billion to US$600 billion in agency bonds, another US$150 billion in corporate bonds, US$40 billion in US equities, as well as US$40 billion in short-term deposits.
“China’s government is now by far the largest creditor of the US,” the authors said. From the fourth quarter of 2007 to the third quarter of last year, it likely lent about US$475 billion to the US.
“Never before has a relatively poor country lent out so much money to a relatively rich country. And never before has the US relied on a single country’s government for so much financing.”
They said these estimates were much larger than those reported in US Treasury data, which tends to understate recent Chinese purchases and total holdings of US assets.
In coming up with the breakdown of holdings and the overall US$1.7 trillion estimate, the authors compared the mainland data on holdings of foreign assets with US data on China’s holdings of US assets. Both data sources, however, tend to understate Beijing’s true reserves and purchases of US assets.
So they adjusted mainland data for “hidden reserves” and adjusted the US Treasury International Capital data for China’s purchases through London and Hong Kong.
Last month, Beijing reported that its currency reserves rose to US$1.95 trillion last year, by far the largest stockpile of foreign exchange in the world. China holds twice the reserves that Japan has and four times more than either Russia or Saudi Arabia.
But the authors said China’s true foreign portfolio exceeded its disclosed currency reserves and placed its total holdings of foreign assets at more than US$2.3 trillion. That is equivalent to 50 per cent of mainland gross domestic product, or about US$2,000 per Chinese citizen.
The council’s analysts pointed out that at the end of December, the State Administration of Foreign Exchange - part of the People’s Bank of China - managed close to US$2.1 trillion. That corresponds to US$1.95 trillion in formal reserves and between US$108 billion and US$158 billion in “other foreign assets”.
Meanwhile, China’s state banks and sovereign wealth fund China Investment Corp together oversee another US$250 billion, putting total foreign assets at US$2.3 trillion.
1 comment:
China investments in US hit US$1.7 trillions
Holdings make it Washington’s largest creditor
Reuters in New York
6 February 2009
China, which holds the world’s largest foreign exchange reserves, is estimated to have US$1.7 trillion in investments in the United States at the end of last year, including treasuries and equities, a report shows.
The country’s US portfolio holdings equal just under 40 per cent of its gross domestic product, the Council of Foreign Relations’ centre for geo-economic studies said in a recent report.
Authors Brad Setser and Arpana Pandey wrote that China held close to US$900 billion of treasury bonds, including short-term bills, at the end of the fourth quarter. It also owned US$550 billion to US$600 billion in agency bonds, another US$150 billion in corporate bonds, US$40 billion in US equities, as well as US$40 billion in short-term deposits.
“China’s government is now by far the largest creditor of the US,” the authors said. From the fourth quarter of 2007 to the third quarter of last year, it likely lent about US$475 billion to the US.
“Never before has a relatively poor country lent out so much money to a relatively rich country. And never before has the US relied on a single country’s government for so much financing.”
They said these estimates were much larger than those reported in US Treasury data, which tends to understate recent Chinese purchases and total holdings of US assets.
In coming up with the breakdown of holdings and the overall US$1.7 trillion estimate, the authors compared the mainland data on holdings of foreign assets with US data on China’s holdings of US assets. Both data sources, however, tend to understate Beijing’s true reserves and purchases of US assets.
So they adjusted mainland data for “hidden reserves” and adjusted the US Treasury International Capital data for China’s purchases through London and Hong Kong.
Last month, Beijing reported that its currency reserves rose to US$1.95 trillion last year, by far the largest stockpile of foreign exchange in the world. China holds twice the reserves that Japan has and four times more than either Russia or Saudi Arabia.
But the authors said China’s true foreign portfolio exceeded its disclosed currency reserves and placed its total holdings of foreign assets at more than US$2.3 trillion. That is equivalent to 50 per cent of mainland gross domestic product, or about US$2,000 per Chinese citizen.
The council’s analysts pointed out that at the end of December, the State Administration of Foreign Exchange - part of the People’s Bank of China - managed close to US$2.1 trillion. That corresponds to US$1.95 trillion in formal reserves and between US$108 billion and US$158 billion in “other foreign assets”.
Meanwhile, China’s state banks and sovereign wealth fund China Investment Corp together oversee another US$250 billion, putting total foreign assets at US$2.3 trillion.
Post a Comment