China: Buy Strategic Assets with Forex Reserves

Ashby Monk

I’m not sure China intended to kick off 2010 by provoking Western fears about its growing economic power, but that may be the result of Sheng Songcheng’s comments today. A representative of the People’s Bank of China, he suggested that the country use its forex reserves to acquire strategic assets around the world, such as oil.

Sheng justified such a policy on the basis of dollar diversification. Similarly, Lou Jiwei recently justified the CIC’s aggressive move into ‘real assets’ by inflation concerns. He said,

“I don’t care about how many tons of oil to ship home, I care about whether stocks are worth more money.”

Whatever the reason given, however, the above seems to suggest that China will be a significant buyer of strategic assets in 2010. While the Chinese may have legitimate reasons for this, using foreign exchange reserves in this manner could reignite protectionist tendencies in the West.

1 Response to “China: Buy Strategic Assets with Forex Reserves”

  1. 1 Politically Motivated SWFs! Yeah, So What? « Oxford SWF Project Trackback on January 5, 2011 at 10:02 am

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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