Mystery of China’s Huge Dollar Surplus Baffles World Markets
- Bumper exports and investor inflows pump dollars into China
- Analysts say it’s unclear where those dollars are being parked
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Unprecedented trade surpluses and record inflows into its bond market are giving China a stockpile of dollars unseen since the days when the ‘Asian savings glut’ was blamed for keeping U.S. interest rates excessively low and fueling the sub-prime mortgage crisis.
But unlike then, when China aggressively recycled its dollar holdings into U.S. Treasuries, China’s giant pile of foreign exchange reserves are holding broadly stable. That means the dollars are being funneled somewhere else, but exactly where is proving to be a bit of a mystery.