China's $1.2 trillion windfall is seeping into global markets

China's record trade surplus last year generated about $1.2 trillion in foreign exchange, and the article reports roughly two-thirds of that flowed into private-sector foreign assets, boosting overseas purchases including a reported $535 billion surge in portfolio investment through September.

China's record trade surplus last year created about $1.2 trillion in foreign exchange, and a large share moved into private hands rather than remaining on the central bank's balance sheet. The article reports that roughly two-thirds of those foreign assets went to companies, individuals and state lenders. That redistribution helped drive more than $1 trillion of growth in non-official holdings abroad in the first three quarters and supported a $535 billion rise in private purchases of overseas securities through September. Analysts and officials quoted in the reporting say the change increases sensitivity to yuan moves and stores up risks for markets at home and abroad. Key facts: - The article reports about $1.2 trillion in foreign-exchange windfall from China's trade surplus last year, with roughly two-thirds ending up outside the central bank. - Non-official holdings of foreign assets rose by more than $1 trillion in the first three quarters of the year, according to China's currency market regulator data cited in the article. - Private purchases of overseas securities increased by about $535 billion through September, per the article's calculations. - By the end of September, non-official foreign assets were reported at $7.8 trillion and, together with official reserves, make up a very large pool of offshore funding. - December inflows of $128 billion were reported as the largest since 2015, amid a rise in companies converting foreign-exchange into yuan, according to a Goldman Sachs note cited in the report. - The People's Bank of China is described as pacing gains in the yuan cautiously while the State Administration of Foreign Exchange did not comment. Summary: The reallocation of export earnings into private-sector foreign assets has broadened China's role as a source of global liquidity and made capital flows more sensitive to currency moves. Observers quoted in the article say a rapid yuan appreciation or coordinated repatriation could prompt a sizable reversal of these flows, and authorities' next moves and the timing of any such changes are undetermined at this time.