Martian2
SENIOR MEMBER
- Joined
- Dec 15, 2009
- Messages
- 5,809
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Look, you're crazy.There is no definition of "official" reserve currency. Banks and other financial institutions don't have to refer to IMF to make their decisions.
As for paying for oil, yes, even China needs dollars for that, because its currency isn't mature and widely traded. Rather, even AIIB, a Chinese Bank is denominated in dollars.
Yes, this is an example of portfolio investments. And it is NOT advantageous to China, because money is leaving China, and in many cases, even the owners of the money may migrate out of China after owning some property. These are not government owned assets, these are assets owned by individuals, who will not follow the government's diktat, and in the particular case of developing countries like India and China, may even leave the country.
China is not going to hold $5 trillion in foreign exchange reserves. That's just dead money.
$3.5 trillion still puts China at #1 in the world by far in foreign exchange reserves.
Taiwan is holding another $426 billion in foreign exchange reserves.
Greater China is still holding $3.9 trillion.
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Let's do the math.
China had a $594 billion trade surplus in 2015. The foreign exchange reserves went down about $200 billion.
Oil has dropped from $60 per barrel to $30. This means China's trade surplus should be about $750 billion for 2016. The net foreign exchange drop this year should be no more than $50 billion. It's trivial.
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