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Why Is There A $71 Billion Difference Between China's FX Reserves And... China's FX Reserves?

 February 06, 2010 01:54 PM


Zero Hedge has been following the topic of Chinese FX reserves, and specifically their change over time, with great interest, as this (presumably) primarily dollar-denominated amount is the critical "dry powder" that our key foreign purchaser of Bonds, Notes and Bills uses when bidding on Treasury Auctions. Should China's FX reserves decline, or be forcibly diversified, the amount left over for UST purchases will be correspondingly less at a time when every UST auction could be the last should PDs, Indirect and Direct bidders not have enough bidding interest to cover growing supply. As China is very secretive about the composition of its FX reserve portfolio, there is usually a lot of guess work involved in tracking where and how the money flows. What we do know, according to a January 15th report by People's Bank of China (PBOC), is that in 2009 FX reserves increased by $453.1 billion to a total of $2.399 trillion... Or so we thought. Yesterday China's official State Administration of Foreign Exchange (SAFE) released an update on FX reserves, according to which FX reserves increased... by only $382.1 billion, a $71 billion differential from the PBOC's number. (an English translation of the SAFE page can be read here).

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We quote from the PBOC's December 2009 Financial Statistics report:

At end-December 2009, China's foreign exchange reserves reached USD2.3992 trillion, registering an increase of 23.28% year on year. In 2009, official foreign exchange reserves rose by USD453.1 billion, adding USD35.3 billion year on year. In December, foreign exchange reserves expanded by USD10.4 billion.


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