China's foreign exchange reserves

China has the world's largest foreign exchange reserves. China saw a rise in these reserves in the first quarter of this year. They rose about $7.7 Billion, which makes a total of Chinese foreign exchange reserves to about $2 trillion. However, it was slow growth compared to other quarter, the reason being is because China’s first-quarter trade surplus shrank 45 percent from the previous three months and foreign direct investment tumbled as the global recession choked off demand. Slower growth in the reserves may limit Chinese purchases of U.S. Treasuries just as the Obama administration seeks to sell record amounts of debt to fund a $787 billion stimulus package. So China, however is in the drivers seat when it comes to the purchasing these reserve which gives them a lot of power to manipulate the price of the dollar through foreign exchange.

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