Tuesday, May 22, 2007

Where are the foreign reserves?


Here is a question from a lay person whose knowledge of the financial markets stops more or less at the ATM-machine. China has a foreign reserve of US$ 1,200 bn and has in a flare of generosity now decided to buy a tiny piece of the US buy-out fund Blackstone for a tiny part of that US$ 1,200 bn. My question is: where is the rest?
I do not assume that the equivalent of uncle Scrooge in Beijing is continuous counting to see if nothing is lost, but at least part must be physically there. Is there a Chinese Fort Knox?
And how much is really virtual commitments? Would they be gone when - for whatever reason - the electricity goes down for a fortnight in the US?
It kept me awake last night.

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