Just What Is China Buying?

Something strange is going on in China. On one hand, as the chart below shows, China's trade surplus is growing and growing, and just hit record highs. In other words, China is - on paper - receiving record amounts of foreign currencies in exchange for its (mostly) goods exports.

That much is clear in the Chinese (record) trade balance chart below:

Yet on the other hand, a chart from Deutsche Bank shows something very peculiar: even as China's foreign reserves should be rising, they are not only dropping, but just suffered their biggest quarterly drop in the past decade!

This validates what the TIC data has shown recently, namely that China has not only not been adding to US Treasury but reduced its TSY holdings to the lowest since February 2013, and that contrary to what some have alleged, China is not using Belgium as an offshore-based conduit for Treasury accumulation.

A bigger question is just what is China buying "off the books" to account for this reserve decline, amounting to about $100 billion in Q3, or is this merely due to even more off the books "capital flight" as some has speculated. Or is China indeed actively buying commodities - either as shown here previously for Commodity Funding Deals involving gold or in physical bulk, perhaps to quietly fill up its new Strategic Petroleum Reserve (see "Record Oil Tankers Sailing to China Amid Stockpiling Signs") - and bypassing the official ledger in doing so. If so, which commodities is China buying, and how big will the foreign reserve plunge be in the fourth quarter.

For the answer to the latter we will check back in a little over a month when the "official" data is released. As for the former, one can only speculate.

Comments

[SubjectivObject]

Jim Willie has for a long time asserted that China was using their dollar reserves to buy up valuable commercial/industrial/farming/resource assets around the world, including significantly in the US.

[Johnny_is_alrea...]

In 2014

Well they are buying $1B+ in real estate in portugal to get residency permits that opens them the gates of EU europe

They bought several companies in portugal too like a chain of private hospitals

There is still plenty to plunder here and portuguese gov continues to ever endebt itself so citizens can continue to rush to the chineese stores and chineese restaurants to offer them more of their (our) future

By the year 2020 I suspect we will be forced to sell a kidney or maybe even a lung to the chinesse as a tax on our public debt