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.
Additional Resources
- 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
Citation
"Why Does China Have Large Foreign Exchange Reserves?," St. Louis Fed On the Economy, May 30, 2016.
This blog offers commentary, analysis and data from our economists and experts. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.
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