A country's foreign exchange reserves always exist in the form of foreign currency and cannot be simply converted into local currency for domestic use. China has maintained a double surplus of current account and capital account all the year round, and accumulated a large number of foreign currency assets.
Now China is really facing such an embarrassment, that is, there is too much money (foreign exchange) and I don't know how to spend it. I can think of several ways to spend it:
1. Buy bulk commodities, such as oil, natural gas and iron ore. , domestic construction needs, so a large number of purchases; Speaking of China, it's also hard luck. With strong manufacturing capacity, there will soon be overcapacity. For such a big buyer in the world, he buys expensive and sells cheap, so everyone has seen the soaring prices of oil and iron ore, which is not easy to preserve. It is impossible to buy all commodities, right?
2. Selling foreign exchange to China enterprises for overseas mergers and acquisitions has been done, but the overseas capital output of China enterprises is still very limited;
3. Assistance/loans to third world countries; This is aid, not to mention the rate of return. In the end, aid to African countries is often free of capital.
Let me talk about the use of funds, that is, the investment of financial assets:
4. The national debt is equivalent to the bank's time deposit. In other words, under the current domestic inflation conditions, you also know that the money deposited in the bank is worthless, but what can you do? There are still a considerable number of us treasury bonds to be allocated. After all, Europe, Japan and other government bonds have also bought a lot, and the risk is higher than that of US government bonds.
5. Corporate bonds, local municipal bonds and other bond products are all foreign enterprises or local governments. The yield is higher than the national debt, but the risk is also greater than the national debt.
6. stocks are more risky.
7. Other stock funds, etc.
China's foreign exchange reserves are still dominated by security, so the proportion of national debt should be quite large. The national debt of the United States should be much more than that of other countries. After all, the liquidity of national debt is also the best. For example, if you withdraw money from the bank, you can take it out at once. What if the stock market is trapped? It doesn't mean you can just sell it.
What can China do with its foreign exchange reserves? You may wish to discuss it.