The World's single, biggest economy prepares to leave it's Western competitors languishing behind in the race to emerge from the global recession.
The Chinese foreign currency reserves have augmented since June 2008 to a record $2.13 trillion, a dramatic increase of 17.8%. The country's currency accumulation is twice the size of it's nearest competitor; Japan. One of the main reason's for China's incredible rise in reserves was due to the country witnessing an increase in foreign investment in its major infrastructure.
This should evoke confidence in the Chinese government, as key businesses and companies from around the globe identify China once again as the most affluent in the World.
Creation of New International Currency?With much of China's foreign currency reserves predominantly in U.S Dollars, there have been calls to create a new international currency, with the majority of the reserves consisting of U.S government debt.
There are prolonged fears that the U.S Dollar will continue to weaken as the American financial crisis persists, and this could threaten to destabilize the price of China's immense holdings of U.S government debt.
Speaking exclusively with Bloomberg News; Stephen Green, head of China Research at Standard Chartered Plc in Shanghai said: "There’s no obvious alternative for China to U.S. Treasury bills. The alternatives are limited for that much money."
However, China's leading economists are confident that the matter will be resolved in the manner of a new international reserve currency.
A Promising Economic Outlook
With the future for China looking much brighter there has been an ever-growing attraction to the country's stocks and property market, with canny investors keen to take advantage of a promising situation. The Shanghai composite index, which is a catalog of all stocks traded on the Shanghai Stock Exchange, has already risen on average around 75% this year, and according to analysts, this influence may continue.
Chinese Economy to Continue to Strengthen
China is widely expected to invest it's billions wisely, by purchasing more U.S treasuries as the U.S government looks to gradually expand it's debt sales. A bank of China economist stated that the country should try to moderately increase it's holdings of treasuries.
Bank of America Merrill Lynch expects China's currency to further reinforce itself this year with a titanic 10% gain on the Dollar. Strategist Michael Hartman also believes the Brazilian Real, and the Indian Rupee will have a similar turn in fortunes in the near future.
With the fragmentary recovery in China's stuttering economy, it appears the situation is well under way to being rectified after figures in property prices, investment, bank lending, and retail sales all increased in recent months.
