WHY IS CHINA BUILDING ITS FOREIGN RESERVE TO THE HIGHEST LEVELS IN HISTORY

The Chinese government is buying dollars, euros and other currencies at a record pace to prop up its currency, the yuan, and to keep its export machine humming The open-market purchases of foreign currency are aimed at keeping its exchange rate from rising too quickly, which might dampen exports and economic growth China has $1.36 trillion dollars in foreign reserves. For investors bought $159 billion in Chinese bonds seeking high yields on yuan-denominated debt. Banks are buying yuan instead of dollars. An appreciating yuan invites hot money inflows making Chinese exports more expensive . https://www.bloomberg.com/news/articles/2021-06-24/chinese-banks-stockpile-record-1-trillion-of-foreign-currencies China has been buying dollars and euros to the tune of $2 billion a day in recent weeks, according to the Financial Times At the same time, Japan is now selling dollars and euros at the fastest rate in five years, while the United States is selling its foreign reserves -- the first time since the 1960s, according to the Financial Times NO INFLATION IN CHINA The Chinese government is trying to keep the yuan from appreciating too quickly, which would make China's exports less competitive compared with other developing countries such as Brazil China has been fighting inflation, which has been above 6 percent, but not enough to dampen growth The government has been raising interest rates to keep inflation from rising faster The Chinese government has been spending a lot to keep up with the country's growth, which has been running at an average of 10 percent for the past decade CHINA'S TRADE SURPLUS WITH THE US HAS BEEN GROWING China is the largest exporter in the world, and is the second largest importer It is the largest trading partner of the US, Japan and the European Union China is also the world's largest consumer of crude oil, which is sold in dollars China is the world's second largest consumer of oil after the US Between China and the US, the trade surplus is tilted in favor of China CHINA HAS A HUGE MANUFACTURING BASE China has a huge manufacturing base that is capable of producing many of the goods sold in the US, Europe and Japan In the past decade, China has become the world's largest exporter By the end of 2007, China had a trade surplus of $232 billion with the US, according to the US Bureau of Economic Analysis The US has an overall trade deficit of $906 billion