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New | Chart of the day: China's reserves powder keg

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Chart of the day: China's reserves powder keg

Chinese officials have indicated before that the currency composition of the country's foreign-exchange reserves is similar to the average of other emerging markets, and data from the International Monetary Fund suggests emerging market central banks on average hold 62.5 per cent of their reserves in US dollar assets. As such, UBS estimates at least 62 per cent of China's foreign reserves are held in dollar assets, the bank's economist Wang Tao says in a recent report. As for asset classes, more than US$2.2 trillion is expected to be held in government bonds by developed countries, including US treasuries, US$320 billion in US equity, US$23.6 billion in US corporate debt and US$110 billion in other assets. But all these items would total only 46 per cent of China's foreign reserves, instead of 62 per cent. "We believe the difference comes from China's indirect holdings of [dollar] assets through third parties such as asset management companies," the report says.

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