These US$ are not Chinese money. They are investor's money. If you understanding accounting, one side is asset, these foreign currencies that China owns are assets to China but it is not the retained earning! Because one other side, China owes liability to the investors. These money may be from the foreign investors or business. For example, a foreign invested us$ in China. If it decides to take back the investment in China and moves back to US or other countries, it will exchange Chinese assets in Yuan back to US$.While business exports product to the US, they got the US$ but you can't use US$ to pay the salary tot he employees or buy raw materials in China. So business will need to exchange US$ to RMB. So China owes the money to those business. This just like when we were in college in China, we used fan-piao to buy food in the school cafeteria, we use RMB to buy fan-piao from the cafeteria. If we have not used those fan-piao, the cafeteria still owe us money. If you don't want the fan-piao, you just returned it to the cafeteria for RMB.
It is very complicated as the Chinese government can not use those foreign currency to invest or build schools,etc. It can only use the taxes to do that. Since RMB is not the currency accepted as US$, China has to maintain that amount currency. It can not invest those foreign currency to risky business. So the US government bonds is the only choice now.
It is very complicated as the Chinese government can not use those foreign currency to invest or build schools,etc. It can only use the taxes to do that. Since RMB is not the currency accepted as US$, China has to maintain that amount currency. It can not invest those foreign currency to risky business. So the US government bonds is the only choice now.
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