SWF Radar PBOC

The China Economic Quarterly, in an article in the Financial Times, discusses research by Brad Setser on China’s stockpile of foreign assets, writing that, “[It] is actually much larger and growing far faster than official foreign exchange reserve figures would suggest - a situation that demands a decisive shift in policy both to keep the country’s finances on track and to dampen international criticism of Beijing’s growing financial muscle.”

Xinhua reports that, “[Yi Gang, vice governor of the People’s Bank of China,] said on Monday that China will continue to cooperate with other countries to cope with the current financial crisis.”

Thomson Reuters reports that, “The global financial crisis is a big test for the macroeconomic policies of developing countries, but China is holding up well and is willing to boost cooperation with other countries, Yi Gang, central bank deputy governor, said on Saturday.”

The Telegraph reports that, “The Chinese central bank [the People’s Bank of China (PBOC)], one of the most secretive in the world, is amassing shares in many of Britain’s blue-chip companies.”

Here is more from the Telegraph.

The New York Times reports that, “[T]he People's Bank of China [PBOC] has begun discussions with the finance ministry on ways to shore up its capital, said three people familiar with the discussions who insisted on anonymity because the subject is delicate in China.”

Brad Setser, in a post on the overseas assets of big Chinese-state-owned commercial banks, takes issue with the trope that “sovereign investors in general and sovereign funds in particular have been a stabilizing presence in global markets.”

Among many other things, he writes that:

The [Chinese] state banks foreign portfolio is way larger than the CIC’s external portfolio.

The evidence that Chinese state banks have been scaling back their holdings of risky assets is overwhelming. First “subprime.” And now Agencies.

China is now a bit like Abu Dhabi. They are a lot different pools of foreign exchange floating around, but all are controlled in one way or another by the state.

I at least have a hard time seeing how Chinese state banks’ current ability to borrow foreign exchange from China’s central bank to lend to Chinese state firms looking to expand abroad quite fits into a story where the state pulls back from the commanding heights of the global economy.

(His post is a response to this WSJ article)

The Telegraph reports that, “China’s central bank [the People’s Bank of China (PBOC)] has acquired a secret [1 percent] stake in Prudential, Britain’s second-­largest insurer, as part of Beijing’s increasingly active plans to deploy its vast pool of foreign currency reserves in overseas markets, The Sunday Telegraph has learned.”

Brad Setser, in a post on Chinese reserve growth, writes that, “[Chinese banks (but not SAFE)] were net sellers of portfolio debt in the second half of 2007. Those sales likely followed losses on the debt Chinese banks purchased in 2006 and early 2007. Scaling back exposure to risky debt may have been wise, but it wasn't stabilizing. The gaps between the rhetoric about sovereign investors (stabilizing long-term investors) and the available data (which suggests a rush for safety after August) can sometimes be quite significant.”

Thomson Financial reports that, “People’s Bank of China vice governor Yi Gang said China remains committed to moving to a market-based, floating regime for the yuan’s exchange rate.”

EUbusiness writes that, “Heightened US and European scrutiny on the investments by emerging nation’s sovereign funds has increased trade frictions and will hurt the global economy, China’s central bank warned Friday. ‘Countries like the United States and those in the EU also strengthened their scrutiny over investments made by sovereign wealth funds from emerging economies,’ the bank said in its latest quarterly report. ‘This has led to escalating trade frictions, which will bring negative impacts on the healthy development of the world economy and the orderly correction of global imbalances.’”