The massive accumulation of foreign reserves by China has challenged the conventional thinking about prudent reserve management. This paper develops a behavioural model of optimal decision making under uncertainty to explain the observed Chinese reserve policy. Departing from the conventional...

One of the puzzles about the Chinese economy has been the huge amount of foreign reserves that China holds. By conventional standards, China's reserve holdings are simply more than enough for its external trade and debt obligations. This research however argues that the overall level of China's...

The combination of American excess consumption and China's financial extravaganza in accumulating US treasuries has been widely perceived as a major contributor to global imbalances. The current research examines whether this curious partnership can be sustained by concentrating on the Chinese...