More specifically, the current value is 1.6 trillion USD. Is this referring to the same pool of money as when people refer to all the U.S. treasuries owned by China? I have heard well-informed people guess no, but I can't imagine that they are correct. The reason is that if anyone had 1.6 trillion USD, what reason could you possibly have for not investing it at least into treasury bonds?
Well perhaps the official currency reserve is invested part into treasury bonds and part into other investments such as CDs, corporate bonds , and perhaps equity.
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May 4th, 2008 at 12:50 pm
The United States routinely sells treasury bonds to various countries. In the last 40 years, the US has been increasingly relying on selling Treasury bonds to pay for such things as the Vietnam War. I think China has bought about a third of the reserves or bonds.
May 4th, 2008 at 12:50 pm
The money isn't invested in anything. It refers to the money the Chinese treasury accumulates as chinese businesses get paid in U.S. dollars and exchange them at home for Yuan. They don't have 1.6 trillion. It used to be close to that level before the dollar began falling. Now it's less. They've talked about creating an investment portfolio of a couple hundred billion. The main reason they do nothing with it is they have extreme inflation concerns in their country. If they were to buy Yuan with it and put into their own economy or distribute it among the people inflation would rise. By comparison Merryl Lynch has a trillion dollars in investments. The U.S. housing market is worth 20 trillion. We exchange more dollars in trade with Canada every year than any other country in the world.