Mystery of China’s Huge Dollar Surplus Baffles World Markets

(Bloomberg) — Unprecedented trade surpluses and record inflows into its bond market are giving China a stockpile of dollars unseen since the days when the ‘Asian savings glut’ was blamed for keeping U.S. interest rates excessively low and fueling the sub-prime mortgage crisis.

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But unlike then, when China aggressively recycled its dollar holdings into U.S. Treasuries, China’s giant pile of foreign exchange reserves are holding broadly stable. That means the…


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