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Yeah, hard to tell just looking at that data. I don't know what currencies each one of the trade relationships is settled in. The differences in balance with th
by conjecTech 7y ago
Yeah, hard to tell just looking at that data. I don't know what currencies each one of the trade relationships is settled in. The differences in balance with the US there is also similar to what they spend on oil (~11%). If all other trade is settled in other currencies and all oil is bought with dollars(from countries other than the US), they would be about flat in terms of dollar reserve growth from trade. My understanding is that most of their dollar reserves originated from buying dollars w/ yuan in the years after 2009 to help keep the value of the yuan depressed for the sake of trade competitiveness. So that does seem to imply that investment balance is the factor tipping the balance here. Which is probably why the Chinese government has set stringent rules on currency controls for individuals.
- treis 7y agoWhich currency the trades are settled in is effectively meaningless as long as it's hard currency. If they end up with a surplus of Euros and a deficit of Dollars they can easily exchange Euros for Dollars. If they end up with fewer dollars it's mostly by choice.
- conjecTech 7y agoWe're talking about hundreds of billions of dollars here. How confident are you that you could 'easily' do that without major undesired effects?
- treis 7y agoThis cite says the average daily volume of EUR/USD trades is half a trillion a day: https://www.currenciesfx.com/index.php/eur-usd https://www.currenciesfx.com/index.php/eur-usd So hundreds of billions of dollars a year is small relative to the volumes being traded.
- conjecTech 7y agoVery little of that is true demand. That corresponds to 10x American GDP annualized.