The secretive government agency that supervises China's foreign exchange reserves used part of its funds to help convince Costa Rica to sever ties with Taiwan and establish relations with Beijing last year, according to documents obtained by the Financial Times.
The purchase of US-denominated Costa Rican government bonds by China's State Administration of Foreign Exchange (Safe) is the clearest proof yet Beijing regards its $1,800bn in foreign reserves – the world's largest – as a tool to advance its foreign policy goals, as well as a potential source of income.
“This is the first smoking gun that proves China uses its foreign exchange reserves for political purposes,” said Kerry Brown, senior fellow with the Asia programme at Chatham House in London. “It raises questions about some of Safe's other investments and will worry politicians and business people in places where Safe is taking stakes in high-profile companies.”
