Despite Chinese rhetoric about wanting to diversify its official reserves away from the dollar, recently revised figures from the US Treasury suggest that the world’s largest creditor country is finding the task pretty much on a par with Sisyphus’s efforts to push the boulder uphill.
China’s holdings of US Treasury securities at the end of December turned out last week to be a whopping 30 per cent higher than earlier official estimates, emerging at $1,160bn compared with $895bn a year before.
This huge increase in just one part of the dollar component of reserves that are reckoned to top $2,750bn in total, irks Beijing, which worries that the Federal Reserve’s loose monetary policy is designed to ensure an endemically weak dollar. Yet such vulnerability is the inevitable result of pursuing a mercantilist exchange rate policy while running an excess of savings over investment.