China has ‘hidden’ foreign exchange reserves of 3 trillion dollars

China stands in a strong position with foreign exchange reserves of six trillion dollars. But half of this huge amount of money is kept ‘hidden’. This poses new risks for the global economy, said US economist Brad Setser. In a report by the New York-based news outlet The China Project, Brad Setser, a former official of the US Department of Commerce and Revenue, wrote that a large part of the country’s foreign exchange reserves is not shown in the official documents of the People’s Bank of China. Instead, these ‘shadow reserves’ are shown as assets of institutions such as China’s state-owned commercial lenders and policy banks. However, China’s official reserves have not increased much in the past few years. But along with the country’s export surplus, the ‘hidden reserves’ have increased. This US economist says the lack of transparency in China about reserves is a bit of a problem for the world. China is so central to the global economy that everything it does overtly or covertly has a major impact on the rest of the world. However, when asked about the ‘hidden’ reserves, China’s State Administration of Foreign Exchange did not immediately agree to comment. According to Setsa, a former trade adviser in the Biden administration, one example of the influence of China’s reserves is their financing of the Belt and Road Initiative. Basically, the project was taken to increase occupancy after the shock of the economic crisis. He said, China is such a big economy country and such an unbalanced economy that all of it Such activities have global implications. Setser said China’s central government entities have probably $6 trillion in foreign assets. But at the end of last year official reserves were shown at 3.1 trillion dollars. In other words, almost half of the money was not reported. Currently, Setser is serving as a senior fellow at the New York-based think tank Council on Foreign Relations. He said, amid discussions about China’s domestic debt problem, this large number of ‘hidden reserves’ reminds us that the country is still a major global creditor. The impact of their foreign exchange reserves is still having an impact around the world. According to him, this important issue is often overlooked due to the discussion of China’s internal debt problem.