by Melinda Liu

As of late, Beijing has been very publicly questioning the dollar's role as the world's reserve currency. Yet China actually increased its holdings of U.S. Treasuries to $800 billion in July, compared with $767 billion in Q1. Despite its tough talk, Beijing knows that selling off greenbacks would wipe out much of its own wealth; it holds a whopping $1.6 trillion in reserves, much of it in USTs. Still, speculation that Beijing is plotting the dollar's demise just won't go away. Earlier this month, the U.K.'s Independent reported that Gulf states, along with China, Japan, France, and Russia, were secretly negotiating to denominate oil trades in currencies other than the dollar by 2018. (Officials in most of the nations involved denied the report.) But such a move would be self-defeating and "would only add volatility to the Gulf countries' already volatile oil revenues," since many Gulf nations peg their currencies to the dollar, says Royal Bank of Scotland economist Ben Simpfendorfer. China has another reason to keep purchasing dollars: to hold down the value of the yuan, it must buy foreign assets--lots of them. So for now, China may have to keep amassing greenbacks.