China's Dollar reserves.
China's foreign currency reserves are heading toward $1 trillion. What effect might this have on the U.S.? Does it give China greater control over the U.S. economy?
I don't think it gives them much clout. They're in the very unhappy position of being at risk of a significant decline in the value of their reserves. Eventually the dollar has to depreciate quite a bit, particularly against Asian currencies. So they're at risk of their reserves depreciating in terms of their domestic currency. They can't really diversify out of dollar holdings because the minute they start to do that they impose losses on themselves
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