Submitted by: Orietta Qi
China has huge foreign exchange reserves every move affects the nerves around the world, but the world is hard to read the operating practices and strategies, but through the holdings of Japanese government bonds in China this again, perhaps something can be read.
First, China’s foreign exchange financial assets investment horizon has been extended from Europe to Asia, due to financial crisis, the U.S. and Europe before the financial assets very difficult to maintain the attractiveness of, and Asia as an important engine of growth the world economy, is indeed, a most good targets.
According to public sources, the Chinese central bank by the State Administration of Foreign Exchange in July last year started a month to buy 300 billion won of Korean bonds, and since July this year to 500 billion won per month or more purchases. The Government official said: “The People’s Bank bonds and notes the major purchase of more than five years, during which the South Korean government bonds to purchase a total of more than 5 trillion won.” This is equivalent to the same period the total foreigners to buy Korean bonds (31.3 trillion won) in the near 20%.
South Korea Financial Supervisory Service recently released data, China in November and net purchases of 556 billion won (about 4.9 billion U.S. dollars) in South Korea bonds, net purchases than in October more than 27%, is nearly six months of the highest monthly net purchases of scale. In the first eleven months of cumulative net purchase of 4.27 trillion won.
The Japanese government bonds, the first seven months of this year, China has continuously increased holdings of Japanese government bonds, net purchases of Japanese government bonds by about 2.3 trillion yen. According to the Japanese Finance Ministry data released on the 8th, the Chinese again in October bought a net 262.5 billion yen of Japanese assets, which is again in the last three months, Japan’s holdings of financial assets.
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Some industry observers pointed out that China trade to Japan, South Korea national debt, and its goal is to internationalization of the RMB, after the global financial crisis, China began to weary of the “green paper” dollar, the yuan make every effort to become the dollar and the euro train After the “Third International Currency.”
Second, China for the operation of foreign financial assets, more accurate, market-oriented and professional. Before the financial crisis, big countries in Europe and America on CD investment philosophy than the current operating practices in China become more and more professional.
The first seven months of this year, China has for Japanese government bonds holdings, net purchases of Japanese government bonds by about 2.3 trillion yen. Next August, China sold 2.02 trillion yen bonds in Japan, Japanese government bonds sold during the year for the first time, also hit the biggest since 2005, holdings of a single month record. And in September to sell 624.3 billion yen, respectively, in China’s short-term debt and long-term debt 144.9 billion yen.
This is because the yen in August, continued to rise in September, the dollar had hit a high point, continued reduction in China during this period are “selling rallies, profit-taking.”
The previous few months, due to setbacks in international economic and financial environment in Europe further deterioration of the debt crisis, the United States continued the implementation of quantitative easing monetary policy, the yen rose into orbit under the influence of multiple factors such as China increased seven consecutive months Japanese government bonds held.
For China’s recent initiatives to buy Japanese government bonds, a market speculation that China following the August and September, after net sales of Japanese government bonds, again jiacang dollar and the euro in order to hedge the risk of depreciation of assets may be.
China’s holdings of Japanese government bonds to support the details of this. China’s holdings of Japanese government bonds in October, the one-year period of the short-term debt accounting for up to 90%, about 231.9 billion yen, while the five to ten years and long-term debt of only 30.6 billion yen, more than fifteen years ultra-long bonds are not purchased.
In the past month, heating up again as the debt crisis in Europe, the euro against the U.S. dollar is in the October sideways shocks, followed on November 5 in a row plunge. The yen against the U.S. dollar is the opposite, although at a slightly lower during October, but November 1 will start bottoming.
Third, China’s foreign financial assets for the main attitude was “focusing on diversity, rather than political.” For China, Japan and South Korea bonds for the operation, there have been numerous international noise, as these operations to China, the so-called political means, but from the performance of the past year, China is more need for preservation. Unable to extricate themselves into a quagmire in the United States and Europe on the occasion, the Asian country’s financial assets, although the yield is not high, but the risk is relatively low, selection of these assets is more wise. China recently has been the diversification of foreign exchange reserves held by the reform of holdings of South Korean bonds, Japanese government bonds is one way of selling.
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