A country’s total reserves can have a dramatic impact on its economic policies. In this post, we’ll look at the countries with the top reserves, especially China, and how that should impact China’s trade wars with the U.S.
- Liquid reserves allow countries significant leverage in economic policies and trade wars.
- China currently holds over $3 trillion in reserves, far higher than Japan’s second-place $1.24 trillion in reserves.
- China also holds a significant amount of U.S. debt, forcing them to walk a tight rope with the U.S.; they don’t want to rock the boat too much, but they have tremendous leverage to use if necessary.
- If China were to sell off its reserves, it would have cascading effects on the economy, including driving up U.S. interest rates.
You don’t fight a trade war without ammunition on both sides. In compiling the data of the largest reserves–or total reserves measured in U.S. dollars–you’ll find a keen perspective as to why the markets seem to react to every headline related to the U.S.-China trade wars.
Why do liquid reserves matter? As it relates to trade wars, a country’s reserve stockpile has a large say in how much economic weight it can throw around. If China stockpiles a large amount of U.S. dollars, it can influence the value of its own currency, the yuan, which is pegged in U.S. dollars. Given that China holds over $3 trillion in reserves–far higher than Japan’s second-place $1.24 trillion–any movement from China can mean massive economic consequences for the globe.
Top 5 Countries with the Biggest Liquidity Reserves
1. China: $3.09 Trillion
2. Japan: $1.24 Trillion
3. Switzerland: $744 Billion
4. Saudi Arabia: $496 Billion
5. Taiwan: $462 Billion
Source: https://howmuch.net/articles/international-liquidity-country
