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Shadow reserves -- how China hides trillions of dollars of hard currency (and maybe gold too?)

Section: Daily Dispatches

There is no mention of gold in this report but at least it may strengthen suspicions that the Chinese government has much more gold than it has been reporting to the International Monetary Fund. It's also a reminder that government financial and economic data everywhere is easily falsified, just as the secret March 1999 report of the executive staff of the IMF confirmed that official gold reserve data is misleading because the agency allows member central banks to include leased gold with unencumbered gold:

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Shadow Reserves -- How China Hides Trillions of Dollars of Hard Currency

China has a lot of foreign exchange reserves that do not show up in the official books of the People's Bank of China. Those funds have been hidden in the state banks and have largely escaped scrutiny.

By Brad Setser
The China Project, New York
Thursday, June 29, 2023

China is so big that how it manages its economy and currency matters enormously to the world. Yet over time the way it manages its currency and its foreign exchange reserves has become much less transparent -- creating new kinds of risks for the global economy.

From 2002 to 2012, China's central bank was active in the currency market almost every day -- usually buying dollars to keep China's currency from rising, and to make sure China's exports stayed cheap.

... Dispatch continues below ...


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During this period, China's foreign exchange reserves steadily increased. So did China's holdings of Treasuries and the bonds issued by Freddie Mac and Fannie Mae -- the two major types of "agency" bonds that are implicitly backed by the U.S. federal government 

Economists worried that China's intervention in the currency market was keeping trade unbalanced; foreign policy gurus worried that China might sell bonds in a moment of geopolitical tension, turning a security crisis into a financial crisis.

But a funny thing happened sometime over the last ten years: China’s reserves stopped rising. 

Sure, the number reported by the foreign exchange authorities bounces around a bit, as the market value of China's long-term bonds and euros sambas with global markets. 

But the foreign exchange reserves reported by the central bank (the People's Bank of China or PBoC), which accounts for its reserves on its balance sheet at their historical purchase price, has been constant. ...

... For the remainder of the report:

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Toast to a free gold market
with great GATA-label wine

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Support GATA by purchasing
Stuart Englert's "Rigged"

"Rigged" is a concise explanation of government's currency market rigging policy and extensively credits GATA's work exposing it. Ten percent of sales proceeds are contributed to GATA. Buy a copy for $14.99 through Amazon --

-- or for an additional $3 and a penny buy an autographed copy from Englert himself by contacting him at

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