China Reiterates the Dollar's Place in Its Foreign Reserves

Rumors that China has lost all confidence in the U.S. dollar have been circulating. It is true that China probably has a long-term plan to position the yuan as a global reserve currency, but that is sometime down the road. For now, the State Administration of Foreign Exchange (SAFE) insists that the U.S. dollar remains a key part of its foreign reserve strategy.

Indeed, GFT's Boris Schlossberg points this out in FX360 about the preference for the U.S. dollar:

Overall however, China’s preference for safety and liquidity in its foreign exchange rate portfolio leaves it with little choice but remain heavily positioned in US fixed income instruments which remain the most liquid capital markets in the world.

But that isn't to say that the U.S. dollar is China's only focus. China is diversifying into energy, gold and other currencies. So, while the dollar remains a key part of China's reserves for now, chances are that this won't be the case 15 or 20 years down the road.