Forex News

China’s flight from the dollar

16/02/12 @ 10:37 GMT by Michael Derks, Chief Strategist

Increasingly apparent is China’s preparedness to reduce its exposure to the dollar and the obligations of the US government. In the year to December, foreign exchange reserves in China rose by USD 330bln to USD 3.18trln. Over the same period, Chinese holdings of US treasuries fell by USD 60bln to USD 1.1 trln. China’s political leaders have made clear in the past their concerns regarding the direction of US fiscal policy and the massive financial liabilities being taken on by the US government. For this principal reason China has been keen to diversify out of the dollar over the past decade. Undoubtedly this process of dollar-diversification might have been even more rapid last year was it not for the genuine fears over the longevity of the euro.

Tags: chinaUSD

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Michael Derks

Chief Strategist

Simon Smith

Chief Economist

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