Is It Desirable for Asian Economies to Hold More Asian Assets in Their Foreign Exchange Reserves?—The People’s Republic of China’s Answer

Abstract

The author calculates the return on the major Asian currency denominated long-term government bonds in terms of a basket of the People’s Republic of China’s (PRC) imports of goods and services, namely the real return on those assets from the PRC’s perspective. He shows that it is desirable for the PRC to substitute Asian currency denominated government bonds for US Treasury bills to maintain the purchasing power of its foreign exchange reserves.foreign exchange reserves; currency basket; asian currencies