What Is China Buying?

Regardless of the authenticity of the data, it may be, as the official interpretation suggests, that the reduction in foreign reserves is the conversion caused by the rise in the US dollar.

Perhaps China is doing some purchases that are not reflected in the published statistics, such as hoarding oil while the international oil price drops.

This week, the US Treasury released the international capital flows report (TIC), which showed that in October, China significantly reduced its US debt by 13 billion 600 million US dollars, holding US debt to a new low in February 2013, while the second largest holder of US debt in the month increased its holdings of US $600 million.

With China's import and export data released in November this week, China's trade surplus expanded further, to a record of 54 billion 470 million US dollars.

In fact, the size of China's trade surplus of 45 billion 400 million US dollars in October was also close to its record highs.

On the one hand, China's foreign trade revenue has continued to soar, while a large number of US debt has been sold. On the other hand, China's foreign reserves have dropped unexpectedly.

According to statistics released in October, China's foreign exchange reserves totaled US $3 trillion and 890 billion at the end of the third quarter, a decrease of about US $100 billion at the end of last quarter, and a ten year high in the quarter.

Guan Tao, director of the balance of Payments Division of China's safe, said the main reason for the drop in foreign reserves was the strong US dollar exchange rate in the international market.

Conversion.

He said:

"In the three quarter of this year, the US dollar index increased by 7.7%.

In addition to us dollar assets, there are other non US dollar assets in our foreign exchange reserves, which need to be converted into US dollars. The US dollar appreciation will lead to a reduction in the amount of non US dollar assets when converted into US dollars.

But these conversion results.

The change in Book valuation is not a real loss, nor will there be any real cross border capital flow.

except

The dollar exchange rate factor has been speculated by Western analysts. It may be that speculative hot money is withdrawing from China, or that China is buying oil with the opportunity of a sharp drop in international oil prices.

Nathan Chow10, an economist at DBS Group in Hongkong, commented that the decrease in external reserves revealed signs of the outflow of hot money, which is why some investors are worried about the poor economic data in August.

Bloomberg reported that in late October this year, a large number of giant tankers poured into China's ports, hitting a 9 month high in Wall Street.

In October 18th alone, 80 large cruise ships with an average capacity of 2 million barrels of crude oil were heading to China, while the average number of cruise ships to China in the past two years averaged only 63.

According to Prof energy data, 10 Central Petroleum purchased 45 ships of crude oil through Singapore to the Middle East, totaling 21 million barrels, the highest monthly purchase volume.

Last month's Wall Street article also mentioned that China's GDP growth rate dropped to a low level of nearly six years in the three quarter, while crude oil imports rebounded.

The import volume of 25 million 500 thousand tonnes per month in the three quarter will boost the import volume this year.

Last month, the Petroleum Exporting Countries (OPEC) said that in the past three months, China's strategic stockpile of oil stocks increased by 35 million barrels.

According to Bloomberg statistics last month, if international oil prices remain at present level, increasing imports of crude oil through the sea will save nearly $20 billion a year for China.

In explaining China's external reserves reduction, Guan Tao stressed that at the beginning of this year, one of the main tasks of the Chinese government's work report was that the balance of payments trend was basically balanced, and that the slowdown in foreign exchange reserve growth would become a new normal.

Whether China's foreign reserves growth will officially enter the downlink region depends on the fourth quarter of this year.

However, China's speculation that the increase in commodity prices may not be found in official data.