China now has $1.756 trillion in currency reserves

According to Brad Setser, who keeps close track of the latest reports from China's Central Bank, China now has $1.756 trillion in currency reserves and is accumulating those reserves at its fastest rate ever, a rate approaching $1 trillion per year.

These reserves include both euro and dollars, but are reported to be preponderantly dollars. (The Chinese Central Bank does not disclose the currency composition of its reserves, so the proportion of each currency must be estimated.) These reserves are accumulated as a byproduct of the Chinese government's currency manipulations. The Chinese Central Bank borrows renminbi (also called yuan) from its own people, instructing its banks not to lend renminbi to Chinese citizens who are not favored by the government. Then they use those renminbi to buy dollars. The effect of those dollar and euro purchases is to cause the dollar and euro to go up in value verses the renminbi. This keeps Chinese wages low compared to US and European wages and allows the Chinese to steal industries from the United States and from Europe.

By the way, about a month ago the Bush Administration told an incredulous Congress that China was not manipulating its currency.

Howard