China's 3 Trillion Dollar High Class Problem

Too much cash.

That’s a high class problem but a problem nonetheless.  Apple (AAPL) is dealing with that problem lately – its common stock trades at a discount multiple because of all the uncertainty over their $70 billion hoard.

Well Apple’s not alone.  China is sitting atop $3 trillion in foreign currency reserves, a ludicrous sum if ever their was one.  They aren’t quite sure what to do with it given the state of flux so many traditional instruments and currencies find themselves in these days…

From MarketWatch:

The amount of U.S. Treasury bonds, dollars, euros and other currency held by the Chinese government is “really too much,” said the bank’s governor, Zhou Xiaochuan, at an April 18 financial forum at Tsinghua University.

Zhou’s comments at least in part reflected international market pressure on the U.S. dollar, which analysts say may comprise 70% of China’s foreign holdings. Euros, pounds and yen are also mixed into the reserves, details of which have never been publicized by Beijing.

I’m guessing Zhou doesn’t love it when Standard & Poors starts issuing warnings about US debt 🙂

So what are China’s options?  JGBs?  Brazilian Reals?  Maybe an account with one of those online Forex bucket shops, that’ll relieve them of some of that money pretty quickly…

Source:

China’s forex cache: too much of a good thing  (MarketWatch)

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65,800,000,000 (TRB)