China has built up its enormous foreign reserves through decades of trade surpluses and foreign investments. One expert said that China has hidden 3 trillion dollars in “shadow reserves” in its state banking system, beyond the official reserves of $3.1 trillion. But I don’t think the shadow reserves still have $3 trillion left.
1). How much shadow reserves does China have theoretically?
2). How much shadow reserves does China have realistically?
Shadow reserves — how China hides trillions of dollars of hard currency
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42 Comments
Thanks!
Woman is talking nonsense about a topic she knows little about. She should stick to garden variety gossips and conspiracies. 😂
Good lord.. What does 'controlled by CCP' even mean in regard to fx reserves? Lol. Are reserves not 'controlled' by the central banks / governments in other countries?? . 😂😂😂
Aiyoh… At one point China held 1.4T in US treasuries alone!!!!
Great job analyzing.
Couple things. First reserves aren’t “savings”, or “earnings”, they are foreign currency holdings that are largely funded through local currency liabilities (debt). Most of the official reserves and all of the hidden reserves in the commercial banks are “funded”. That is to say there is a cny liability (loan) funding the foreign currency asset. They are funded through FX swaps. So they are leveraged, and it’s a positive carry trade, but there is full currency risk. Second the PBOC pushes the majority of reserves to SAFE and CIC. SAFE is a classic SWF, is somewhat transparent and very professional. The funds that go to CIC are more opaque and it’s hard to know where they end up. Third the “hidden reserves” in the Chinese commercial banks are really just the PBOC and China avoiding being tagged a currency manipulator. They direct the local banks to buy usd vs cny but not book a deal against the PBOC, the local bank has to just keep it on their own books as an open position long usd vs cny position. That’s fine as long as the cny remains weak.
I nominate fearless Lei for President of China.
Lei- You are giving to much credit to Xi. The US is not afraid of Xi. The thing is the US has been putting so much money in China that they are protecting their money, that's all
Thx Lei for sharing this, appreciate 🙏🙏. Awaiting results of Xi's current visit and talk with Biden. Im surprised that Xi willing to come, this may signaling the real condition of China economy. Who needs who we will know later.
It is frustrating. The US always reacts to new initiatives by the CCP. We seem incapable of anything other than trade measures. They have been flooding the US with drugs for years and all we do is ask them to stop. They say that they will crack down but both sides know they have no intention of stopping. They would rather send more.
As a new subscriber, I just wanted to say that I greatly appreciate the depth and accuracy of the analysis that Lei does. I'm telling everyone I know about her work. This show should be more widely known.
Would referencing the Panama Papers be relevant here?
Lei, should you adjust your estimate of China’s GDP to include “shadow GDP”?
00:02: ! The video discusses China's foreign reserves and the author's attempt to solve the mystery surrounding them.
6:51: 💰 China's government controls the foreign currencies owned by both the public and private sectors through government approval and restrictions on currency trading.
13:08: 🔍 China's central bank hides its foreign reserves among commercial banks to conceal the extent of its control.
19:58: 📊 Determining China's foreign reserves is difficult due to loopholes and discrepancies in data, but it can be defined as the foreign currency investments controlled by the CCP.
27:38: 💰 China's outward foreign direct investment (FDI) of $2.7 trillion is primarily controlled by state-owned and government-controlled enterprises.
33:41: 📉 China's foreign investments are mainly controlled by state-owned enterprises (SOEs) and not in private hands, indicating a high percentage of outbound investments are not part of China's foreign reserves.
40:20: 📊 China's foreign reserve system may be in negative due to extensive spending on national defense and currency exchange rate war.
47:30: 🤔 The speaker discusses the use of HSBC to hide foreign reserves by CCP and the difficulty in following the money trail.
53:23: 💪 The speaker believes that the West needs to be tougher and not afraid to provoke China in order to win in a competition with the CCP.
1:01:02: 🤔 Some people are questioning why Xi Jinping's people want to set up a hotel that looks like a mourning center.
1:06:52: 🌍 The Chinese Communist Party (CCP) wants to spread its ideology globally and sees the United States as a barrier to achieving its goal.
Recapped using TammyAI
Maybe the "foreign reserves" are actually just the pallets of Cash and Gold that the CCP Members and generals have stolen and stockpiled at their houses….
They do have a substantial aircraft leasing business which they are trying to sell !
Just for your information, China has spent the majority of USD on Physical Gold.
Really valuable information, Lei….Never show fear or concern to the CCP! Thank You…
I am guessing part of the 1.074 T goes to "Professional Services" to dummy agencies to usurp/subvert/corrupt other countries…. part of the CCP's unrestricted warfare vs the West.
Thanks for your report on this issue. Manipulation of foreign reserves, using commercial SOE banks. Just one more example of unfair business practices that violate WTO agreements.
Lei what do you think of michael pettis, economist in China?
Espionage/consulting?
Thanks
Admire your deep and very sensible analyses of communist china's FR!
Hope you can present in your next video details on communist china's national defense spending. Thanks Lei for your revealing scholarly videos!
Lei, thanks for covering this extremely difficult subject, as data sources are indeed impossible to come by or verifiable. Nonetheless, it is an excellent attempt to throw some lights into this subject, on how much is PRChina's real holdings of Foreign Reserve.
Stop supporting the CCP don't buy from temu , Alibaba eBay China's sellers.
You are building their military
Doesn't that just mean the CCP can simply steal the foreign currency reserves of their own citizens wherever they like?
So the money went into the pockets of individual CCP members? Oh dear…
😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂😂
Dear Lei, believe you watched their meeting at woodside calif. Seeing list of attendance, the speech, their gestures, each of us have our own thinking. We'll see..
China is not a communist country. Don’t misleading audiences. More professional less sentimental please.
You do a good job of reporting the facts. Do you talk about issues outside of China, if so could you take a look at mideast and express what you find, is this just a pawn move and sacrifice of Hamas to create other problems for US to solve. Are most of problems in the world and espicially in US be traced back to China and their desire for world control. Peter Zehian belives China will collaspe in on itself in a few short years due no people comming up in certain age brackets that happend many years ago. Do you agree and what is your view on many of these issues
She speaks incoherently… Can't understand what she's trying to put across.
I am sorry to say, but Western leaders are very dumb. As for strategies, Xi is 10+ steps ahead of them. Well play Xi 👍👍👍
Setser's analysis is reasonable and consistent with trends and Chinese policy moves started long ago. The Social Security Investment Fund may still be holding foreign currency assets. There are surely offshore accounts under the control of Chinese individuals and entities. Whatever the current reserves, they are enormous and exceed by far any rational amount of prudential reserves needed to service hard currency obligations. By sanitizing current account surpluses and building up hidden hard currency reserves is a means of avoiding the strengthening of the RMB that would be needed to balance current accounts.
When China requires commercial bans to hold a certain percentage of their reserves, those reserves cannot be used by the banks. These funds are in fact controlled by the state.
Of course official reserves are only with PBoC/SAFE acc to IMF!
Is this flooding happening now or is it old pictures? What do you know? https://www.youtube.com/watch?v=ucPj2q0bd-o
America is not putting out fires anywhere: In the middle east, they are using Israel to wipe Hamas off the map….In Ukraine, they are using Ukrainians to fight, bleed, and die in order to topple Russia.
For the low, low, price of new shells, and old weapons slated for destruction, the U.S. gets to knock off a moral enemy that pointed nuclear weapons at it….Whether Ukraine wins or not is immaterial, the U.S., with this war, has already damaged Russian manufacturing, financials, oil industry, and most importantly demographics….1 million Russian left Russia, plus over 300K killed.
The U.S. believes it got a bargain with the Ukraine war and Russia will never be the same.
Next us, (after the 2024 elections) China….
The U.S. wants to decouple from China, but it's allies do not have time to switch their supply chains, plus find new export markets…
Lei, I am sorry to tell you, but you are wrong thinking that the CCP deceived the Americans in the war CCP vs Kunming Tang. The Soviets were building up an army to invade all of Christian Europe in 1930' & 1940'. That was only possible because the USA under Roosevelt supported the Soviet Communist. The Americans Build a Truck company that to this day is the world's largest. More or less, every American industrialist rushed to the Soviet Union to make money, as in China in our day. Why do you think all middle European countries were sold out to the Soviets after the war? To this day, America is lauding itself to have liberated Europe. Ask the people of Estonia, Latvia, Lithuania, Poland, Czechoslovakia, Rumania, Hungary, Serbia, Croatia, Slovenia, Macedonia and I think some more like Ukraine, Belarus, etc, what they think of this WW2 American liberation. Most people of today think Germany was fighting the war all by itself, far from it, hundred thousands if not million volunteers from all European countries joined the war on the German side, some in the Wehrmacht (Defence Army) or the latter renamed European SS, Schutz Staffel (Protection Echelon). And why did the American occupation forces, the US Army, had to kill about 2 million German soldiers and civilians after the war? They had special hunting units that went aster German scientist. Many civilians that went to the US in the operation Paperclip only did so under the thread of being killed if not! Many scientists were shot by the Americans and British hunting units. Roosevelt had a first come together of American industrialist in 1939, to divide the German loot they expected. That is your true America, American soldiers broke into banks to steal valuables that were deposited in safe boxes. Broke into private houses with the families at home to steal whatever they could find. The average German worker was "richer" than his American counterpart, and had no morals, as now again.
Anyone saw any demonstration on American streets, after the Democrats stole the election? This same people or their descendants helped the Chinese communist to build up China. Anyone saw demonstrations on America's streets for the J6 people, or this policeman who kneeled on this full of deadly drugs negro? The Americans call themselves Christian, but they don't CARE and their so-called justice system is totally broken, sending people to prison for some hundred of years, what insanity!
nood