Today, I was chatting with a friend about Chinese Foreign Exchange Reserves (FER), he asked “since China holds as much as 3.18 trillion US dollars FER, do you think it looks too fat and why not rescue the EU debt crisis with part of them? What does $3.18 trillion mean in real life?

 What I told him was as follows:

It cannot deny that the central bank of China has massive money, but it is some kind of a general lack of imagination. Quite a large part of the foreign exchange reserves are held in form of the US Government Bond. Whether China has a thought of “Buy Europe Out” or not, it is certain that China has sufficient appetite and capable to buy whatever he is willing to buy, though Chinese Premier J.B. Wen stated that it is such a ridiculous joke for china’s intention for a buyout of Europe when he met with German Chancellor Angela Merkel in Guangzhou on Feb.3.2012.

With such substantive foreign exchange reserves,

 1)      China can purchase the sum of the national debt among Spain, Ireland and Greece so that solve out the EU debt crisis shortly. And if China did it, it can still keep half of FER.

2)      China can send a Tata Nano( the cheapest car in the world) generously to every Indian( 1.27 billion Indians) and the remaining money can even buy one-year petrol, which is easily “accelerate” India and solve the paralyzed and congested traffic in India.

3)      Rather than purchase large amount of US Government Bond, China can buy corporate stocks as much as he likes. Suppose if China “swallow up” Apple, IBM, Microsoft and Google with merely no more than 1 trillion US dollars, how could it be in the Internet world? Monopoly?

4)      Like some Arab sheik and Russian oligarches, China can purchase the UK football clubs. According to Forbes, the gross value of world’s 50 most valuable Sports Organizations in 2010 was just 50.4 billion US dollars, less than 2% of China’s FER

5)      When take account of the real estate investment, China’s FER can totally purchase the whole Manhattan with a payment of $0.287 trillion and $0.232 trillion for Washington DC!! Since China is accustomed to be the creditor of Washington, why not change the role to the landlord?

6)       Finally, theoretically, China can also buy the US Department of Defense! According to the balance sheet acquired in 2010, the value of the organization is about 1.9 trillion which includes the plant, equipment and entities, while the gross value of the weapon is just $0.4137 trillion dollars.