The nation's foreign exchange reserves are held by China's central bank. The total sum of the reserves is regularly announced by the central bank. At the end of September 2015, the foreign-exchange reserves of China were US$3.51 trillion, while, at the end of January 2016, they stood at US$3.23 trillion. They are the highest among foreign-exchange holdings of nations in the world, ostensibly more than triple the size of next country on the list.
Composition
The exact composition of the foreign-exchange reserves of China is a classified information. Foreign analysts agree that about two-thirds of Chinese foreign-exchange reserves are held in U.S. Dollars, approximately one-fifth in Euros, and almost all the rest in Japanese Yen and British pounds. Most of China's foreign-exchange reserves are held in U.S. dollar-denominated financial assets such as U.S. Treasury securities. Since 2008, when it overtook Japan in this respect, China is the largest foreign owner of U.S. Treasury securities, accounting for about 22 percent of all U.S. Treasuries held by non-Americans.
Concerns over Chinese holdings of U.S. Debt
Many American and other economic analysts have expressed concerns on account of the People's Republic of China's "extensive" holdings, as part of their reserves, of United States government debt. The National Defense Authorization Act of the fiscal year 2012 included a provision requiring the Secretary of Defense to conduct a "national security risk assessment of U.S. federal debt held by China." The Defense Department issued its report in July 2012, stating that “attempting to use U.S. Treasury securities as a coercive tool would have limited effect and likely would do more harm to China than to the United States. As the threat is not credible and the effect would be limited even if carried out, it does not offer China deterrence options, whether in the diplomatic, military, or economic realms, and this would remain true both in peacetime and in scenarios of crisis or war.” The 112th United States Congress introduced legislation whose aim was the assessment of the implications of China’s ownership of U.S. debt. The subsequent Congressional Report of 2013 claimed that " potentially serious short-term problem would emerge if China decided to suddenly reduce their liquid U.S. financial assets significantly" , noting also that Federal Reserve System ChairmanBen Bernanke had, in 2007, stated that “because foreign holdings of U.S. Treasury securities represent only a small part of total U.S. credit market debt outstanding, U.S. credit markets should be able to absorb without great difficulty any shift of foreign allocations." A significant number of economists and analysts dismiss any and all concerns over foreign holdings of United States government debt denominated in U.S. Dollars, including China's holdings. Critics of the "excessive" amount of US debt held by China acknowledge that the "biggest effect of a broad-scale dump of US Treasuries by China would be that China would actually export fewer goods to the United States."
