China trade surplus reaches $137bn (for 2nd Quarter of 2015)

[AndrewJin]

I have written a thread however it was merged into "Chinese Economy & News" (@waz @Oscar can you reinstate the thread?). Sure let's introduce the subject again.

Countries rich in Trade Surpluses (e.g. strong in oil export, or strong in merchandise export) with low External Debt, may accumulate large amount of Forex. There are several methods to manage the Forex, (1) In form of FX Reserves on balance sheet of central Banks, or (2) In form of Sovereign Welfare Funds, or (3) Other forms e.g. oil reserves, commodity reserves.

Forex Reserves By Country

• China has been experiencing record level trade surpluses over the years, however the Forex Reserves is currently maintained at the level of US$ 3.77 trillion (Mainland only; Excluding that of Hong Kong, Taiwan, Macau). The governance of Forex Reserves are more defensive in general.

Sovereign Welfare Funds By Country

• Relative to a steady level of Forex Reserves, China has been building SWF's progressively. It's believed much studies have been done on Singaporean model i.e. GIC, Temasek. By now there are a few Chinese SWF's at the moment e.g. CIC, SAFE, total assets exceeds US$ 1.53 trillion.

• Hong Kong SAR has its own SWF, asset value now at around US$ 400 billion.

• Relative to the experienced economies like Singapore, Norway & UAE, China is new to SWF. For details of individual SWF in China and across the world, please check the following link:

Sovereign Wealth Fund Rankings | Sovereign Wealth Fund Institute

Notes

• As mentioned above, Singapore's model is very successful in managing a huge asset (FX $250 billion + SWF $538 billion = $788 billion), something China has studied for years. Their professionals like Miss Ho Ching (CEO of Temasek), Mr. Lim Siong Guan (Chairman of GIC) as well as many senior executives of GIC have given valuable advices to China government in constructing SWF's.

• Other than Singapore, other financial powers like Hong Kong SAR, Norway, UAE, etc., their SWFs are larger than FX Reserves. In Singapore's case the ratio is more than 2 times ($537 billion vs $250 billion). For Norway, UAE, almost entire assets are on SWF, practically don't keep any FX Reserves.

• Now China just mainland alone has a tremendous asset (FX $3,771 billion + SWF $1,535 billion = $5,306 billion) to manage, let alone Greater China (Hong Kong, Taiwan & Macau) combined (over $6,480 billion). China's SWF are expected to be fast growing while FX Reserves will maintain at current level, and become one primary vehicle for international investment.

Singaporean can definitely teach Chinese in mainland how to mange SWF well.