As every central banker, politician (except Chuck Schumer), and bank CEO looks towards Chinese central planners as their apparent bottomless pit of dumb money, it seems that perhaps the cupboards are bare. Reuters, via The China Post, highlights in a recent article that while there are indeed reserves, they are gainfully employed and the unwinding of those positions (in size enough to matter) to provide the cash that is so desperately needed to keep the ponzi going, will itself cause a vicious circle of negative sentiment. In fact, analysts reckon China's armory has only about US$100 billion to spare.Analysts suspect China's forex may be weaker than perceived (Reuters, via The China Post)Europeans searching for a bazooka to blast away eurozone debt problems might well eye China's US$3.2 trillion foreign exchange arsenal with envy, but Beijing has far less firepower available than many assume. Most of money in the world's biggest store of foreign exchange reserves is prudently kept in near-cash instruments to fund import and debt service bills in the event of an unforeseen domestic emergency, or invested in long-term assets that, if sold in size to help Europe, would spark panic on global financial markets. In fact, analysts reckon China's armory has only about US$100 billion to spare. “The sheer size of China's foreign exchange reserves is massive, but the actual amount of money available for investing in Europe each year isn't that big,” said Wang Jun, an economist at CCIEE, a top government think tank in Beijing. A crucial constraint is China's existing holdings of U.S. Treasury securities. Beijing is by far the biggest foreign owner, with an estimated 70 percent of the nation's reserves held in U.S.
