Why Does China Have Large Foreign Exchange Reserves?

May 30, 2016

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.

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