Reacting to data released earlier this week showing that China's foreign currency reserve holdings are now the largest in the world, the National Association of Manufacturers pointed out Wednesday that Chinese reserves have now surpassed those of Japan.
"At $848 billion, China's reserves have now grown beyond the $837 billion held by Japan, and remember, Japan's economy is two-and-a-half times larger than China's," said Patricia Mears, NAM's director of international commercial affairs. "What's more, China's currency reserves are nearing half of China's total gross domestic product. Rather than tying up that much of its economy in low-interest official holdings - primarily in U.S. dollars - China could be using those funds to build internal economic strength.
"China continues to buy dollars to keep its currency suppressed below market values in order to fuel export-led growth, but it's high time for this to stop. It's distorting global trade flows and distorting China's economy. China's currency reserves grew $220 billion in the past 12 months alone. Not coincidentally, that was the size of its trade surplus with the United States last year."
She pointed out that the Treasury Department's semi-annual report on currency manipulation is due later this month.
"In light of this latest evidence of massive one-way dollar purchases, it's imperative that Treasury conclude that China is manipulating its currency. In addition to drawing that conclusion officially, it is essential that Treasury work with other governments to convince China that the time has come to stop this harmful practice," Mears said.
About the Author
