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  • About
  • The Global ETD Search service is a free service for researchers to find electronic theses and dissertations. This service is provided by the Networked Digital Library of Theses and Dissertations.
    Our metadata is collected from universities around the world. If you manage a university/consortium/country archive and want to be added, details can be found on the NDLTD website.
1

Why China Should Invest Its Foreign Exchange Reserves in the Major US Banks

Chen, Qianbing 01 July 2009 (has links)
The subprime mortgage crisis and the resultant inflationary monetary policy in the USA have left the Chinese economy subject to four risks in particular. First, China's exports to the USA might continue to decline. Second, in the medium term, the higher US inflation rate will lead to a weak dollar, which will negatively affect China's exports. Third, in the long term, when the US Federal Reserve decreases money supply to control inflation, the US economy might enter another recession, hurting China's exports further. Fourth, China's foreign exchange reserve assets might suffer heavy losses when the US inflation rate rises. Conventional foreign exchange investment strategies are insufficient for dealing with these four risks. Investment by China in the major US banks is suggested in the present paper. This strategy would mitigate if not eliminate all four risks. China could gain considerable financial returns on investments with only moderate risk.

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