With the recent release of data by China’s Central Bank, it is clear that China sold bonds during January and February but started purchasing in March this year. It seems that the foreign reserves of China this year have hit its slowest increase of 8 years. It has edged up by $7.7 billion this year as compared to the increase of $153.9 billion in the same quarter in the previous year.

As reported by the People’s Bank, China saw a fell in its reserves of $32.6 billion in January and $1.4 billion in February but saw an
increase of $41.7 billion in March. The increase in the month of March showed that there is a decrease in the capital flight from the
country.

According to famous monetary economists of China, Yu Yongding, the balance of financial power between China and U.S. is tipped in the favor of U.S. Yu Yongding, mentioned a famous saying: “If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.”

Mr. Wen a Chinese official has mentioned that he feels nervous about the fact that China has lent so much money to US. He says he is worried about his country’s assets. China is scared that the American efforts against the economic downturn will cause inflation and will lower the value of American bonds. Apparently China has invested heavily in American Bonds.

It seems China will continue to monitor the situation as it seems they are worried about their money.