On Thursday, the People’s Bank of China, the country’s central bank, announced that at the end of March it was holding $3.04 trillion in foreign currency reserves, up a spectacular 24.4% over the last 12 months.
No other nation comes close to possessing as large a pile of foreign cash. Japan, in second place, has about $1.12 trillion.
Thursday’s announcement makes the PBOC, as the People’s Bank is known, appear strong. Yet the institution is in urgent need of recapitalization. It is, in all probability, insolvent. In fact, what makes it look mighty—its mountain of dollars, euros, and yen—is creating its weakness.........
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