The world of foreign exchange reserves is full of false narratives and complex data.
Here, Brad Setser, uses international banking sleuthing to show that China has not switched its reserves away from dollars.
“Bottom line: the only interesting evolution in China’s reserves in the past six years has been the shift into Agencies. That has resulted in a small reduction in China’s Treasury holdings – but it also shows that it is a mistake to equate a reduction in China’s Treasury holdings with a reduction in the share of China’s reserves held in U.S. bonds or the U.S. dollar.“
