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Lots of countries, lots of businesses are plunging money into China. General Motors has this factory in Shanghai. The Park Hyatt is building this project in Beijing. It's a process repeated thousands of times. And of course, China is also busy selling things overseas. So where does all this lead? Well, China has now built up foreign reserves of one trillion dollars. That's a thousand billion, most of it in US currency, where even a small policy shift could throw global finance into chaos.
What everyone worries about is that China begins shifting its reserve accumulation out of dollars and into some other currency, the obvious ones being the Euro and the Yen.
That would force up those other currencies and potentially spark a run on the US dollar.
In theory, it could collapse.
So let's put all this into perspective, if you take the mighty US Federal Reserve, it currently stands at 66 billion dollars and you put it, say, into this building, it would fit into the ground floor. The Chinese Reserves now would take up the whole building itself. Even if China shifted that money somewhere other than into currencies, for example, building up stockpiles of oil, the jolt to oil prices would affect almost everyone on the planet. China today promised to do nothing rash.
China will continue to act in a responsible manner and play a constructive role in global economic stability.
One Beijing-based economist says the US especially, is paranoid about China's intentions. But why, he said, would China want to disrupt the global economy when it's currently doing so well from it?
Hugh Reminton, CNN, Beijing.
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