Foreign Currency Reserves

An International Herald Tribune article informs us that this isn't the first time China has amassed vast foreign currency reserves by trade imbalances. (Hat tip: Economist's View)

China will soon release statistics showing that it has passed Japan as the biggest holder of foreign currency the world has ever seen. Its reserves already exceed $800 billion and are on track to reach $1 trillion by the end of the year, up from just under $4 billion in 1989. But China has held a similar position before.

Lest one should start to panic, remember that America receives more gain than pain from its trade with China.