China's foreign currency reserves have grown at such a fast past to their favorable balance of trade with the rest of the world. The accusation of the yuan being undervalued, which most analysts agree to be true has helped China achieve such a rapid and favorable balance of trade. The result is an increase in foreign reserves. Having such a large foreign reserve stockpile allows the Chinese to intervene in the market and alter the value of the yuan. The Chinese always have the option of switching from U.S. dollar reserves to another currency, such as the euro. With a devaluing dollar and a rising euro the Chinese could be tempted to make such a switch. There are political issues that are also involved in such a move, such as the clout the dollar reserve holds for the Chinese in negotiating with the United States.
