China’s perceived economic invincibility often rests on the fact that the People’s Bank of China has accumulated $3 trillion in foreign currency reserves: in theory, this massive amount of wealth should insulate China from economic shocks. Yet many experts at home and abroad believe that the assets could instead be a losing position.
With the beginning of new economic policies in the beginning of the 1990s, China boosted its holdings of U.S. treasury debt from $200 million in 1989 to $1.17 trillion by November of 2012, according to data from the treasury. But U.S. official debt only accounts for one third of the $3.3 trillion in foreign assets that the PBOC holds on its books. According to Chinese state media, 70 percent (or $2.3 trillion) are invested in U.S. dollar assets. Apart from treasuries, this includes U.S. agency debt, U.S. corporate debt, and U.S. equities…………………………………….Full Article: Source