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Sovereign Wealth Funds Briefing - Categorized | Reserve Currencies

How to value China’s reserves

Posted on 29 March 2011

One of the arguments put forward for resisting the revaluation of the Chinese yuan is that China will “lose value” on its large foreign-exchange reserves, held mainly in U.S. dollars but also in sundry other currencies. If China’s exchange rate is moved, for example, by 10% from 6.6 yuan per dollar to 6.0 yuan per dollar, the yuan value of China’s reserves will fall by 10%, thus reducing China’s wealth.

This argument is arithmetically correct, but economically incorrect. China’s wealth will not decline with revaluation of its currency…………………………………….Full Article: Source

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