The foreign-exchange reserves of China are the state of the People's Republic of China holdings of cash, bank deposits, bonds, and other financial assets denominated in currencies other than China's national currency (renminbi). In October 2016 China's foreign exchange reserves totaled US$3.12 trillion, the lowest total since 2011, but remained higher than the foreign exchange reserves of any other nation.[1][2]

The management of foreign-exchange reserves is governed by the State Administration of Foreign Exchange (SAFE)[3] and the People's Bank of China.[4] The composition of foreign-exchange reserves is a state secret in China.[5]


The nation's foreign exchange reserves are held by China's central bank.[4] The total sum of the reserves is regularly announced by the central bank. At the end of September 2015, the foreign-exchange reserves of China were US$3.51 trillion,[6] while, at the end of January 2016, they stood at US$3.23 trillion.[1] They are the highest among foreign-exchange holdings of nations in the world,[1][2] ostensibly more than triple the size of next country on the list.[7]


The exact composition of the foreign-exchange reserves of China is a state secret.[5][8] Foreign analysts agree that about two-thirds of Chinese foreign-exchange reserves are held in U.S. Dollars, approximately one-fifth in Euros, and almost all the rest in Japanese Yen and British pounds.[8]

Most of China's foreign-exchange reserves are held in U.S. dollar-denominated financial assets such as U.S. Treasury securities.[9] Since 2008, when it overtook Japan in this respect, China is the largest foreign owner of U.S. Treasury securities,[10] accounting for about 22 percent of all U.S. Treasuries held by non-Americans. [11]

Concerns over Chinese holdings of U.S. Debt

Many American and other economic analysts have expressed concerns on account of the People's Republic of China's "extensive" holdings, as part of their reserves, of United States government debt[12][13][14].

The National Defense Authorization Act of the fiscal year 2012 included a provision requiring the Secretary of Defense to conduct a "national security risk assessment of U.S. federal debt held by China." The Defense Department issued its report in July 2012, stating that “attempting to use U.S. Treasury securities as a coercive tool would have limited effect and likely would do more harm to China than to the United States. As the threat is not credible and the effect would be limited even if carried out, it does not offer China deterrence options, whether in the diplomatic, military, or economic realms, and this would remain true both in peacetime and in scenarios of crisis or war.”[15]

The 112th United States Congress introduced legislation whose aim was the assessment of the implications of China’s ownership of U.S. debt.[15] The subsequent Congressional Report of 2013 claimed that "[a] potentially serious short-term problem would emerge if China decided to suddenly reduce their liquid U.S. financial assets significantly" [emphasis in the original text], noting also that Federal Reserve System Chairman Ben Bernanke had, in 2007, stated that “because foreign holdings of U.S. Treasury securities represent only a small part of total U.S. credit market debt outstanding, U.S. credit markets should be able to absorb without great difficulty any shift of foreign allocations."[15]

A significant number of economists and analysts dismiss any and all concerns over foreign holdings of United States government debt denominated in U.S. Dollars, including China's holdings. [16][17][18][19] Critics of the "excessive" amount of US debt held by China acknowledge that the "biggest effect of a broad-scale dump of US Treasuries by China would be that China would actually export fewer goods to the United States."[14]

See also


  1. ^ a b c "China’s Forex Reserves Plunge to More-Than-Three-Year Low" by Lingling Wei, with Liyan Qi, Wall Street Journal, 7 February 2016
  2. ^ a b "China central bank deflects concerns over forex reserves" by Chen Aizhu, Reuters, 28 February 2016
  3. ^ See State Administration of Foreign Exchange's website -->English-->About SAFE-->Major Functions
  4. ^ a b About the PBC, People's Bank of China website
  5. ^ a b "China’s dwindling forex reserves raise worries" by Gabriel Wildau, Financial Times, 18 October 2015
  6. ^ Financial Statistics Q1-Q3 2015, People's Bank of China website, 9 November 2015
  7. ^ "China Reserves Fall in July as PBOC Steadies Yuan Amid Outflows" by Fion Li, Bloomberg, 7 August 2015
  8. ^ a b "China’s large forex reserves constitute both a blessing and a curse" by Gabriel Wildau, Financial Times, 30 September 2014
  9. ^ "Except for U.S. Treasuries, what can you hold? Gold? ... U.S. Treasuries are the safe haven. For everyone, including China, it is the only option." Statement by Luo Ping, a director-general at the China Banking Regulatory Commission, as reported in "How Dangerous Is U.S. Government Debt?" by Francis E. Warnock, associate professor of business administration at the Darden Business School, University of Virginia, Council on Foreign Relations, June 2010
  10. ^ "Major Foreign Holders of Treasury Securities", U.S. Department of the Treasury, 18 February 2014
  11. ^ "Report on China’s Foreign Exchange Reserves and Holdings of U.S. Securities" by Nargiza Salidjanova, United States-China Economic and Security Review Commission, 21 March 2014
  12. ^ "Is China's Ownership Of U.S. Debt A National Security Threat?" by Kenneth Rapoza, Forbes, 23 January 2013
  13. ^ "... Should Americans be concerned that China has started dumping some of its Treasury holdings? After all, it raises serious questions about whether China will keep lending Washington money to help finance the federal deficit in the future.": From "China is dumping U.S. debt" by Matt Egan, CNN, 11 September 2015
  14. ^ a b "Is it a risk for America that China holds over $1 trillion in U.S. debt?", China Power, 2 February 2016
  15. ^ a b c Report on "China’s Holdings of U.S. Securities: Implications for the U.S. Economy" by Wayne M. Morrison & Marc Labonte, Congressional Research Service, 19 August 2013
  16. ^ :"...What about indebtedness to foreigners?...To acquire [U.S. gov't bonds], China must export goods to us, not offset by equivalent imports. That is a cost to China. It’s a cost Beijing is prepared to pay, for its own reasons: export industries promote learning, technology transfer and product quality improvement, and they provide jobs to migrants from the countryside. But that’s China’s business. For China, the bonds themselves are a sterile hoard. There is almost nothing that Beijing can do with them;...its stock of T-bonds will just go on growing. And we will pay interest on it, not with real effort but by typing numbers into computers. There is no burden associated with this; not now and not later." From "In Defense of Deficits" by James K. Galbraith, The Nation, 4 March 2010
  17. ^ "...The Chinese buy U.S. T-securities by transferring U.S. dollars (not yuan) from their checking account at the Federal Reserve Bank to China’s T-security account, also at the Federal Reserve Bank. When[ever] the Chinese redeem those T-securities, the money is transferred back to China’s checking account at the Fed. During the entire purchase and redemption process, the dollars never leave the Fed." : From "What Policies for Global Prosperity?" by Warren Mosler, 23 September 2010
  18. ^ Mitchell, Bill, University of Newcastle (Australia). "The nearly infinite capacity of the US government to spend" (28 March 2012); "The US government can buy as much of its own debt as it chooses" (27 August 2013)
  19. ^ "...The US, as a sovereign currency issuer, faces no financial constraint. It cannot be forced into default. It controls its policy interest rate. The rest of the world are users of the dollar; not issuers. They can never hold [the United States] hostage." : From "What If China Dumps US Treasury Bonds?" by L. Randall Wray, University of Missouri-Kansas City, 12 November 2013

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