<p>There is no necessary relationship. Canada is a major trading partner of the United States, and the Fed can increase its balance sheet without Canada increasing its official reserve holdings. Why should China be different?</p>

CC BY-SA 4.0
2020-06-12T12:48:29.643Z
2020-06-12T12:48:29.643Z
Brian Romanchuk
<p>As seen in the chart, China's FX reserves have remained flat lately despite the massive balance sheet expansion of the Fed. Though out of the temporal domain of this chart, if it were extended back to 2008 we would see the ensuing years saw a large increase in China's FX reserves.</p>

<p><a href="https://i.sstatic.net/du7C8.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/du7C8.png" alt="enter image description here"></a></p>

<p>I can think of a few possible explanations ranging from political tension to dollar liquidity needs, but I don't think I can take my explanations beyond conjecture.</p>

<h2>Question</h2>

<p>What is a logical explanation for the recent divergence between Fed liabilities and China's FX reserves?</p>

<macroeconomics><monetary-policy><currency>
Why would China's FX reserves stay flat as the Fed ramps up its balance sheet?
Arash Howaida
# Why would China's FX reserves stay flat as the Fed ramps up its balance sheet?

(Asked by: username_0 on 2020-06-12)

As seen in the chart, China's FX reserves have remained flat lately despite the massive balance sheet expansion of the Fed. Though out of the temporal domain of this chart, if it were extended back to 2008 we would see the ensuing years saw a large increase in China's FX reserves.

[![enter image description here](https://i.sstatic.net/du7C8.png)](https://i.sstatic.net/du7C8.png)

I can think of a few possible explanations ranging from political tension to dollar liquidity needs, but I don't think I can take my explanations beyond conjecture.

## Question

What is a logical explanation for the recent divergence between Fed liabilities and China's FX reserves?

**Tags:** macroeconomics, monetary-policy, currency


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## 1 answers

### Answer by username_1 on 2020-06-12. Score: 1 | Accepted answer

There is no necessary relationship. Canada is a major trading partner of the United States, and the Fed can increase its balance sheet without Canada increasing its official reserve holdings. Why should China be different?


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