Why Does China Have Large Foreign Exchange Reserves?
China has a significant amount of foreign exchange reserves, but why? In this video from the most recent Dialogue with the Fed event, St. Louis Fed Assistant Vice President and Economist Christopher Neely explains that China keeps reserves for the same reason people in the U.S. invest for retirement: taking care of needs in old age. China’s population is aging and will eventually need support once working is no longer an option. Neely also discussed how reserves provide a form of precautionary savings.
- Dialogue with the Fed: Choices for China; Consequences for Us
- On the Economy: Four Things China Could Do to Address Capital Outflows
- Economic Synopses: Chinese Foreign Exchange Reserves and the U.S. Economy