Managing China’s forex reserves

Stuart Larkin writes on the appropriate level for China's increasing foreign exchange reserves which will soon reach US$1 trillion, most of it invested in US Treasury bonds. 

CHINA recently announced that its foreign exchange reserves at the end of May stood at US$900bil and are set to reach US$1 trillion before year end. For officials at the People’s Bank of China (PBOC), one trillion of reserves will herald a triumph in their longstanding position of “the more foreign exchange reserves the better”.