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Where Can China Stash Its Cash?

Aug 08 , 2011

Where is China stashing its $3.2 trillion in foreign exchange reserves?

The answer to that question in the past, everyone agrees, has been mainly in U.S. dollar debt, especially Treasurys (Beijing, of course, doesn’t say where it invests the reserves). But Washington’s flirtation with default on its debt obligations and the prospect that its credit rating might be lowered despite this week’s 11th-hour deal¨Chas left Beijing unamused.

China might not be able to do much about the estimated $1.2 trillion it already has invested in Treasury securities. A fire sale would spook the markets, engineering the crash China is so keen to avoid.

Tom Orlik is the China correspondent for the Wall Street Journal’s Heard on the Street column.

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