China's new path in managing foreign reserves

Overview

China's decision to set up a new agency to diversify its burgeoning foreign exchange holdings signals a new trend in the development of global financial markets. Instead of limiting investments to US Treasuries, reserve accumulations will begin to be channelled into a broad range of international assets.

The entry of China and an increasing number of other reserve-accumulating countries into the global hunt for assets suggests that the current boom in prices will continue to find...