China makes another small step towards the global financial system. It's pretty amazing that it's taken them this long.
Previously that money went into low-yielding bank deposits and made it's way into U.S. T-Bills via the central bank.
Now the question: will these funds continue to flow into the U.S., easing pressure on the central bank, or will they now flow into higher yielding assets in India and Eastern Europe, thus making it harder for the central bank to maintain the dollar peg?
3 comments:
There are some conflicting numbers in that article. It first says 1/5 of the assets can be invested overseas, then it says up to $800 million in stocks and $300 million in bonds. That's $1.1 billion. They then say the total fund assets are $25.1 billion. Looks like their amount is 1/25 of assets, not 1/5.
In any event, the amounts are small in relation to current markets. They will have almost no effect on US monetary policy.
Aside: Do they really expect to support their ageing population with $25.1 billion?
Brian: I don't have more information than is in the article, but I assume that "approve for" and "plan" aren't the same thing. They have approval for 1/5, but presumably it takes time to actually find a home for that money.
The amount here is small, but I assume this is just a first step
The Chinese people save an incredible amount of money privately, so this fund isn't going to provide for the aging population. But I believe the intention is to move more towards pension funds so that individual Chinese citizens can afford to consume more and save a little less.
... Ami.
This may give as many answers as questions:
http://goldsea.com/Asiagate/601/17savings.html
It would seem that even a hundred billion isn't all that much. well, to *me* it is, but not to the US market.
Post a Comment