China’s State Administration of Foreign Exchange (SAFE) bought US$150 million worth of Costa Rican government bonds, a move seen as evidence that the country is using its US$1.8 trillion foreign-exchange reserves as a tool to advance foreign policy objectives such as the diplomatic isolation of Taiwan, the Financial Times reported. According to documents obtained by the newspaper, SAFE bought the bonds in January as part of an agreement in which Costa Rica cut 63-year-long diplomatic ties with the Republic of China. Foreign aid payments have long been used by both the mainland and Taiwan as incentives for diplomatic recognition, but this finding marks the first time SAFE, which has only recently begun making foreign investments, has done so for this purpose.
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