China's Foreign Reserves Approaching $1 Trillion

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China's Reserves Near Milestone, Underscoring Its Financial Clout [Wall Street Journal]

Summary: China's foreign reserves are expected to reach $1T sometime this week. While its massive accumulation provides greater assurance it can handle economic shocks on the mainland, it's also raising concerns over the power it can wield overseas. Some in the U.S. government worry whether China might someday sell-off a sizable portion of its dollar-based holdings. At present, however, it is credited with keeping a lid on interest rates to the benefit of Americans, while at the same time being the target of currency manipulation, even though the latter, if addressed, would result in higher prices for U.S. consumers. China is said to be diversifying and seeking higher returns. For instance, it's believed China is slowing its purchases of U.S. Treasury debt in favor of debt issues from U.S. mortgage lenders Fannie Mae and Freddie Mac.
Related links: China's Massive Infrastructure Spending for '08 Olympics and Beyond • China's Ever-Growing Trade Surplus • The Paulson Effect: China Hawks in Senate May Delay Vote • Paulson Wants Even More Flexibility in Yuan • Beijing's Revised Export Tax Rebate Policy Boosts Stocks • China's Latest Attempt to Cut Its Trade Surplus • Fannie Mae, Freddie Mac Mortgage Portfolios Escape Regulatory Caps
Potentially impacted stocks and ETFs: Fannie Mae (FNM) and Freddie Mac (FRE), both are constituents in the SPDR Financial ETF (XLF)

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