The depreciation of the dollar is accelerating and China's foreign exchange reserves are shrinking

-Evening news report yesterday, the dollar index, measured at trade-weighted levels, fell below 74.50 per cent, its lowest level since the beginning of August 2008, with the euro decisively breaking a 1.5050 dollar peg against the dollar, and the dollar also plunged to a 16-month low against the yen. According to data released by the People's Bank of China, as at the end of September 2009, our foreign exchange reserves balance has reached 2.2726 trillion U.S. dollars.　　However, because the external storage structure is not disclosed, the general view of the market, in China's foreign exchange reserves, the dollar assets accounted for about 70%, the yen is about 10%, the euro and the pound is about 20%.　　The dollar's accelerated devaluation will no doubt raise fears of a large dollar-denominated Chinese currency reserve shrinking. Zhang Ming, a researcher at the Center for International Financial Studies at the World Economic and Political Institute of the Chinese Academy of Social Sciences, said that the potential capital losses on China's external reserves include two categories, the first being the decline in market value of foreign exchange reserve assets, such as the rise in the US Treasury yield curve, which would result　　Thus causing capital loss to creditors, the second category is the capital loss caused by the depreciation of foreign currency against the local currency, i.e. the capital loss caused by the exchange rate fluctuation. Data show that 2003 years later, with the dollar effective exchange rate into a longer period of depreciation, the U.S. dollar index adjusted reserves in China began to continue to be lower than the stock before the adjustment, and the gap is increasing. By the end of September 2009, the gap had exceeded 500 billion dollars.　　That figure could be interpreted as a loss of capital to China's "foreign savings" as a result of the decline in the dollar's international purchasing power. In addition, a report by the Academy of Social Sciences calculates this: it is assumed that from September 30, 2009 to September 30, 2010, the dollar would depreciate by 20% for all major currencies, including the renminbi, even if the exchange gains and losses of the new foreign exchange reserves were not counted, The capital losses suffered by the PBoC will also be as high as 3.1157 trillion yuan.　　This is equivalent to 14% of the central bank's total assets at the end of September 2009, 10.4% of China's GDP in 2008 and 141.6 times times its own capital at the end of September 2009. In a report, CICC noted that the continued depreciation of the dollar over the past several years has left some policymakers with a loss of confidence in the dollar. Under pressure, the central banks of these countries, while reducing the dollar, have shifted their reserves to other currencies, leading to a decline in the dollar's position as the world's reserve currency. The report predicts that this trend will continue.