The shares of the major currencies in global reserves, as reported to the IMF.
1/
The dollar's weight in global reserves is roughly 3 times the United States weight in the global economy (maybe a bit less0; the euro's weight is close to its weight in the global economy -- and China still punches way below its weight, for obvious reasons!
2/
A far more interesting chart showing global reserves --
The big, interesting important story isn't shifts in share ... but the huge increase in reserve holdings from 02 to 14, and the subsequent reduction in the pace of accumulation.
3/
A technically demanding global reserves chart -- one showing actual flows (purchases + retained interest income) by currency.
The bond market adjustment complicates everything; I don't yet have a good bond market adjustment for the euro.
4/
China's reserve sales in 15-16 obviously figure heavily in that chart ...
and there was a quite large pickup in reserve accumulation in 2020-21 that we now tend to forget.
5/
And some of the most interesting stories told by the reserves data have nothing to do with China --
For example, EM Asia sold a lot of reserves last summer and fall, in what I think was a successful defense against an overshot of their currencies when oil was high!
6/
And, as I have noted many times and in many different ways, looking only at formal reserves misses much of the picture these days -- China has as much money in state banks, its policy banks and state investment funds as it holds in its formal reserves ...
7/7
So there are stories to tell that don't hinge on creatively graphing these two lines ...
8/8
• • •
Missing some Tweet in this thread? You can try to
force a refresh
A quick thread highlighting the (many) puzzle's in China's balance of payments data --
The first, of course, is why did errors (now the statistical discrepancy)/ hot money flows disappear with the property bubble? (my answer is that they didn't really)
1/
A related puzzle: why did hot money outflows (errors) fall off the cliff at the same time as FDI inflows? (my answer is that they didn't really, but it is a puzzle)
2/
A related puzzle -- why did fx inflows (from the current account, portfolio inflows & FDI) disappear from q2 22 to q4 24 and then bounce back so strongly?
A bit of work in progress. The net foreign assets of China's state commercial banks doesn't include the net foreign assets of the policy banks. So I converted net "other" in the BoP into a monthly series, and plotted it against net foreign assets.
Good fit
1/
The gap between the cumulative flows since 2010 in the two series (mostly from 2014 to 2018) implies ~ $1 trillion in net foreign assets in the policy banks, consistent with the work of @AidData
Note this is an upper bound estimate in some ways.
2/
@AidData Throat clearing: net other is defined as net loans, net deposits and net trade credits, and then I added portfolio debt assets b/c the state banks hold a lot of foreign bonds (including all of the bonds makes it an upper bound estimate)
3/
US imports of pharmaceuticals from the world's low tax jurisdictions have more than tripled since the (Pharma) Tax Cuts and (Irish) Jobs Act was passed ...
1/
The US trade deficit in pharmaceuticals has gone from $50b to around $200b (close to 0.7 pp of US GDP)
I liked Trump's term one trade policy a lot better than Trump's current trade policy.
Back then, the bulk of the tariff increase was on goods from China.
Now, not so much
1/
Gearing up for the May trade data release
In April, tariff revenue was around $20b, equally split between China and the rest of the world.
During Trump's first term the increase in monthly tariff revenue (to $5/6b) was essentially from tariffs on China going from $1b to $4b
2/
Tariff revenue from countries other than China, for future reference ...
Taiwan so far has gotten off relatively lightly, largely b/c of the semiconductor exclusion from the reciprocal/ base tariffs (expected future 232 sector)
Foreign demand for US bonds was a bit too strong in 2023 and 2024; it has pushed the dollar up to untenable levels.
But there is a some risk of a real reversal now
2/
Not sure that Trump's comments over the weekend about the future path of US rates (and issuing bills until he installs a compliant Fed chair) will increase global appetite for US bonds
Just a reminder that Saudi Arabia runs a current account deficit these days -- and its break even oil price (for the balance of payments) is around $90 a barrel ...
1/
The latest balance of payments data only runs though q1 -- but the difference between the oil price and Saudi's breakeven implies a much larger deficit in q2 than in the past few quarters
2/
Saudi external asset accumulation over the last 4 quarters has been financed by debt, not out of its oil proceeds