[ForexNews]

China’s latest surge in reserves – a surge that look its total holdings over two trillion dollars – didn’t really register in the financial media. China’s first trillion was a big story. The second trillion, not so much. It generated a few news stories and blog posts, but not the kind of big feature stories that accompanied China’s first trillion.

The second trillion though came remarkably fast. It took a few millennium for China to get its first $1 trillion in reserves (Ok, more like a decade … ). The second trillion took less than three years. Reserves topped $1 trillion in late 2006. They topped $2 trillion in April 2009.

The second trillion would have taken even less time if China hadn’t shifted about $200 billion into the PBoC’s other foreign asset and another $100 billion or so to the CIC (after netting out the funds that flowed back into the PBoC when the CIC bought SAFE’s stakes in the Chinese state banks). If all of China’s foreign assets are counted, China’s foreign portfolio likely topped $ 2 trillion back in June 2008.
But there is another milestone that China is fast approaching — one that should be a big story. On current trends – and, to be sure, a lot could change, especially if China is serious about using its reserves to fuel the outward expansion of Chinese state firms, especially those state firms bidding for the world’s commodity supply – China’s holdings of Treasuries should top $ 1 trillion in about a year.
Chinese purchases of Treasuries, after taking account of China’s likely purchases through London, are once again growing in line with China’s reserve growth. Look at a chart of China’s total holdings of US assets.** Its Treasury holdings picked up in May.

Brad Setser: Follow the Money Blog Archive Two trillion and counting ?