This Rachel Ziemba, filling in for Brad Setser. I’m having technical upload issues so will add charts later but for now some thoughts on reserves Chinese reserves data released today seem to be one more sign that the Chinese stimulus might be working a bit too well. China’s reserves stood at $2.13 trillion up from $1.95 trillion at the end of March 2009. Although reserve accumulation was likely lower than the headline $178 billion, it implies that hot money is back in China. Adjusting for valuation, Chinese reserve growth was likely about $140 billion, much higher $60-70 billion of China’s trade surplus, FDI and interest income in this period. This accumulation also suggests that China continues to have a hard time diversifying its holdings away from the U.S. dollar. Adjusting for valuation – the changes in value of the non-dollar holdings in China’s reserves — would imply reserve growth of around $135-140 billion

Read more here – Chinese Reserves: Boiling Over Again?