Claims of $3 trillion in hidden reserves for China

Brad Setser, a former US trade adviser to the Joe Biden administration, wrote that China’s foreign exchange reserves are actually about $6 trillion, not $3, and about $3 trillion of this is “hidden ” in the balance sheets of different institutions.

Stating that the official reserve asset of the People’s Bank of China (PBOC) is $3.1 trillion, but about $3 trillion of reserves are among the assets of state-owned commercial banks, Setser called this part “shadow reserve”.

‘RISK TO THE WORLD’

Setser, who signed off on a report published on a New York-based news platform called The China Project, said this hidden reserve also poses a new kind of risk to the global economy.

Stating that China’s official reserves have been stable in recent years, but its hidden reserves have increased due to the foreign trade surplus, Setser stressed that the lack of transparency in the country is also a problem for the world and that whatever China does will have huge effects on the rest of the world because of its central position in the global economy.

China’s official administration of foreign exchange did not respond to Bloomberg’s question on the matter.

‘CAN BE USED IN BAND AND ROAD PROJECT’

Setser, who is also a senior fellow at the Council on Foreign Relations (CFR), one of the leading US think tanks, said the hidden reserve can be used to finance the ‘one belt and one road’ project, adding new ways of managing China’s exterior. foreign exchange reserves after the 2009 global financial crisis. He indicated that he had decided to find out.

Setser pointed out that China has accumulated a large amount of foreign currency, is a big creditor in the world, and its hidden reserves are forgotten when talking about China’s domestic debt problems.