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Introduction

The emergence of China as a major international actor has been the dominant geopolitical event of the new millennium so far. In the last decade, China has emerged as the largest exporter of manufactured goods to the USA with a favourable merchandise trade balance of approximately US$ 266 billion (total Sino—US trade of US$ 409 billion in 2008) causing it in the recent years to emerge as the biggest holder of US-dollar assets as part of its foreign exchange reserves (US$ 1.95 trillion).1 Above its treasury holdings, surveys suggest the total dollar share of China's reserves is estimated to range from US$ 1.2 trillion to US$ 1.7 trillion. In 2008, China's financed half—close to US$ 400 billion—of the USA's current account deficit. ...

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