An official on China’s monetary policy committee expressed fear that the Federal Reserve’s policy of quantitative easing will lead to higher inflation, diminishing the value of China’s American holdings. At present, China has $3.3 trillion in U.S. long-term securities.
There has been some concern on the part of FOMC members about the Fed’s policy. Those who disagree with continuing the policy warn of inflation, claiming quantitative easing may expose the economy to greater risk.
Despite the Chinese official’s concern, China added $51.3 billion, a record amount, to its foreign-exchange reserves in January. China made the second largest purchase, $36.9 billion, in May 2008, pre-crisis.
Is the January purchase a sign of renewed economic stability?