06/12/10 Stockholm, Sweden – This past week China’s State Administration of Foreign Exchange, or SAFE, indicated that it will “improve its diversification strategy on investing its foreign-exchange reserves–which at nearly $2.5 trillion is the world’s largest–but gave no details,” according to The Wall Street Journal.
The regulator had earlier indicated that the euro will stay an important part of its mix, despite the region’s debt crisis. More recently, though, it has also downplayed the usefulness of gold in particular as an asset class.
This from MarketWatch:
“China’s State Administration of Foreign Exchange, the regulator which oversees the nation’s nearly $2.5 trillion foreign exchange stockpile, said Thursday that the gold market is too small, illiquid and volatile to be considered suitable for asset allocation, according to a Reuters report…
“Safe did not give an update on its gold holdings, which rose to 1,054 tons last year from 600 tons in 2003, as a result of purchases of local production. Safe also said in the annual report that it plans to improve the diversification strategy for the management of China’s reserves, including the range of asset classes it believes are suitable. It did not provide details.”
On the one hand, China is seeking to improve the way it manages its foreign exchange reserves. On the other hand, it’s denying any speculation of big changes in dollar- or euro-denominated assets. China’s also highlighting its disinterest in gold, despite nearly doubling its gold holdings over the past seven years. It all seems a little contradictory… and the statement doesn’t really leave much room for new alternatives. It’ll be interesting to see how China ends up stashing its huge nest egg.
You can read more details in coverage at The Wall Street Journal and at MarketWatch.
Best,
Rocky Vega,
The Daily Reckoning
Rocky Vega
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let’s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
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If I had a lot of paper money, of course, I will say paper money is best. If I had a lot of gold, I will also say gold is most valuable. True?
If 2.5 trillion eyeing, tuning and focusing on gold, there won’t be dignity left for the trillions.
Given the capabilities of the printing press, paper money will retain nil value in the short foreseeable future. A little exaggeration! HaHaHaHaHaHaHa……….
As China continues to be our trading partner and pretends to be concerned about our economy they are making huge cyber attacks and hacking in on our defense systems and banking systems. I saw this on a panel on C-Span 2 yesterday. China is not our friend and any greedhead that invests in China or companies that do business with China may well be someday considered the ones that have brought the U.S. to its knees. (kind of like investing in Hitlers Germany in the 30s). Short term profits are not good in this situation and those that believe in investment in China really do need to consider the long term chances for the US to exist as we know it is very precarious at best.
IF YOU BELIEVE CHINA TO BE THIS DECADE’S POWERHOUSE, WHY NOT INVEST IN IT. IF WE CAN GET BACK A NON-SOCIALIST GOVT. THE US CAN PROSPER AGAIN, BUT IT’S NOT CHINA’S FAULT WE ARE SO SCREWED UP