Instead, what can be called “shadow reserves” appear among the assets of entities such as state commercial lenders and policy banks, he said. While official reserves have flat-lined over recent years, the “hidden” variety has likely pushed higher alongside China’s export surplus, he said. “China’s lack of transparency here is a bit of a problem for the world,” Setser wrote. “China structurally is so central to the global economy that anything it does, seen or unseen, will eventually have an enormous impact on the rest of the world.” An example of the influence China’s reserves can have is their role in funding the country’s Belt and Road Initiative, which stemmed from a post financial-crisis push to diversify holdings, according to the former Biden administration trade adviser.

“They are powerful enough of an economic force such that an entire, global, decades-long infrastructure plan was in some ways, just a side effect of a 2009 decision to find new ways to manage China’s foreign exchange,” he wrote. “Well, China is so big an economy – and such an unbalanced economy – that all its activities just have an outsized global impact.” Institutions reporting to the central government probably have closer to $6-trillion in foreign assets, Setser said. That compares with the $3.1-trillion in official reserves the State Administration of Foreign Exchange reported at the end of last year, he said. Setser is now a senior fellow at the Council on Foreign Relations, a New York-based think tank. The scale of these hidden reserves “highlights an important fact that is often forgotten amid all the talk of China’s domestic debt problems,” he wrote. “Globally China is still a massive creditor, and the weight of China’s massive accumulation of foreign exchange is still felt around the globe.