China’s Rapidly Growing Currency Reserves
As most people somewhat closely following China know, the Chinese government has recently surpassed US$1 Trillion in currency reserves, largely in US Treasuries (although with an ever increasing amount of Euro-denominated reserves), and has a monthly trade surplus with the US of over US$20 Billion.
China has even surpassed Japan as the global leader in currency reserves. Imagine that. This translated from this week’s Modern Weekly:
China took only 26 years to accumulate $1 Trillion in currency reserves, passing Japan to become the leading nation in currency reserves. In 1980, China didn’t yet have any currency reserves.
Can China’s Currency Reserves Continue to Grow?
Is this sustainable? Or rather, can China’s currency reserves continue to grow at such a breathtaking pace?
Unlikely. The average US consumer is up to their necks in household and, to a lesser extent, credit card and other forms of debt, and this just at the peak of possibly the greatest asset bubble in history: the housing run up over the last fifteen (and especially the last five) years in America. Whether they want inexpensive running shoes or top of the line electronics, many Americans are going to find it very hard to keep up their blistering pace of consumption set in the past several years.
Yet it looks like most consumers are blissfully unaware of the extent and likely severity of this housing downturn, and will make one last hurrah this holiday season, meaning that currency reserve accumulation is unlikely to slow down for China until next year, when things may start to look quite bleak for the average American consumer.