Economists estimate that more that 70 per cent of the reserves are invested in US dollar assets, which has helped to sustain the recent large US deficits. If China were to stop acquiring such a large proportion of dollars with its reserves - currently accumulating at about $15bn (EU12.4bn) a month - it could put heavy downward pressure on the greenback.
Goods imported to the U.S. will themselves become more expensive, and will no longer have as much of a dampening effect on domestic prices here, paving the way for a "surprising" uptick in future CPI numbers, including the phony "core" rate of inflation.
However, according to Stephen Green, economist for Standard Chartered in Shanghai, although the language was "vague", Thursday's statement was the first time Safe has publicly indicated a shift away from dollar assets.
"It is a subtle but clear signal that they are interested in moving away from the US dollar into other currencies, and are interested in setting up some kind of strategic commodity fund, maybe just for oil, but maybe for other commodities," he said.
And their appetite for commodities from around the world will continue to grow. Thanks to prudentbear.com for the pointer.