While economists worry about oil prices hitting $100 and cheap textiles from China flooding the world, far-sighted bankers are looking at the financial opportunities. Foreign exchange (FX) reserves are piling up in China and the Gulf’s oil exporting countries in quantities never before seen in history. By end 2006 the estimated combined reserves of the Gulf Co-operation Council (GCC) states and China will already have reached a massive $1350bn. That is the equivalent of the current reserves of the 24 largest economies in Asia, Latin America, central Europe (including Russia) and Africa combined.
They cannot all be channelled into US treasury bonds. Even debt-hungry America does not have that kind of appetite to borrow money and the Gulf states have been wary of placing their funds in the US since 9/11.
