Late last week, many central banks worldwide dumped massive amounts of money into their respective country’s banking systems in efforts to help the markets and exchange traded funds (ETFs). China’s way of helping create stability was to stop concern that it would dump its dollar holdings, reports the Associated Press. If China were to get rid of those assets, it could create further instability in the global markets.
China is the largest holder of foreign exchange reserves in the world and is believed to be comprised largely of dollar assets. With the weak dollar and the threat of credit tightening strangling the liquidity in markets domestically and abroad, there was concern over what China might do. Chinese officials came out to say the dollar was still an important mainstay reserve, and that the safety, liquidity and returns were priorities for the country.
Richard Shaw of QVM Group points out that today’s a different world as China emerges as a full-fledged economic powerhouse, eager to participate in the global market. Although there are a few China country-based ETFs, no Chinese currency-based ETF exists yet. As China’s recent decision shows its financial strength, an ETF in that area might come soon.
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