China is influenced by the US dollar, but now Beijing silently diversifies its reserves to reduce its reliance on the world's largest reserve currency, CNBC reported. 

An ANZ Research report said trade tensions between the US and China increased the risk of financial separation between the two largest economies. The White House has been considering some restrictions on US investment in China.

Therefore, according to ANZ forecast, Beijing will manage risk by diversifying its foreign exchange reserves into other currencies, as well as building up ‘shadow reserves.’

“Although China still allocates a high share of its FX exchange reserves to the USD ... the pace of diversification into other currencies will likely quicken going forward,” ANZ says in the report, adding that the share of the dollar in the country’s foreign exchange reserves was estimated to be around 59% as of June.

Beijing is gradually reducing its stocks of US Treasury bonds, in which it actively invested - China was the largest foreign holder until June. According to a DBS report, since the peak in 2018, China has reduced its assets by $ 88 billion over the past 14 months.

Beijing continues to expand its purchases of gold, and its official gold reserves are at record levels of 1959.5 tons as of October.

Another important way China could deal with this risk is to create other forms of assets that ANZ has called ‘shadow reserves’. “In fact, we believe that the Chinese government has already discreetly diversified its offshore portfolios to include alternative investments,” the ANZ report said.