China’s July reserve increase – at least if the end-July total of $954.5b that the Chinese leaked is right (Lex had a slightly higher number) – was pathetic.
A measly $14b.
Not the manly $20-25b we expect. Sinopec’s acquisition of a Russian oil field from TNK-BP (a potential $3.5b outflow) may be the reason. (Hat tip, Peter Lee of Euromoney.)
Even with an extra $3.5b added in, China’s total isn’t all that impressive. Sure, if it was all invested in dollars, it would be about 1/5 of the monthly US current account deficit.
But other emerging markets are raising the bar.
China’s $14b total was topped by the combined $20b from its fellow BRICs. Brazil added $4b or so in July, India $1b and Russia $15b. These numbers have not been adjusted for valuation changes, but valuation wasn’t a big factor in July.
For that matter, Russia and Saudi Arabia combined to add almost $25b to their central bank’s foreign assets in July. That is a lot of money that has to be lent out to someone. And Russia and Saudi Arabia combine to account for less than ½ of the roughly 40 mbd in oil exports (a lot of oil is consumed where it is produced). There are a lot of other oil exporters with an awful lot of cash on hand right now.
Russia paid about $24b to retire its Paris Club debt in August, and it still ended August with only $6b less in the bank than it had in July. Do the math .. Russia’s underlying pace of reserve growth remains very, very robust.
The other BRICs together now hold $500b or so in reserves. That doesn’t match China’s $950b ($1 trillion counting reserves shifted to the state banks). But it ain’t too shabby either.
And by my (confidential, don’t tell anyone) estimates, the combined reserves of the world’s big oil exporters – just those in the emerging world – will top $950b by the end of 2006. That total counts (as usual) all foreign assets that show up on the Saudi Monetary Agency’s balance sheet.
China’s reserves will certainly top $1 trillion by then. But the oil exporters are gaining … And if the Abu Dhabi Investment Authority’s rumored $400-500b is added in, well, China almost starts looking like a bit player in global markets ..