‘Astronomical’ Chinese reserves under scrutiny: Fed paper

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A Federal Reserve Bank of St. Louis working paper furthers the discussion of China's massive foreign reserves.

Titled Making Sense of China's Astronomical Reserves, Yi Wen, the paper's author, complains that current global-imbalance literature, which explains why capital flows from poor to rich countries, cannot explain China's foreign asset positions because capital cannot flow out of China under capital controls.

The paper uncovers a "related but deeper puzzle" in that the literature fails to

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