BIZCHINA / News
Nation to halt accumulating forex reserves
(Shanghai Daily)
Updated: 2007-03-21 16:31
China will stop stockpiling its massive foreign exchange reserves,
China's central bank governor Zhou Xiaochuan said in an interview
published Tuesday.
"Many people say that foreign exchange reserves in China are [already]
large enough," Zhou told the Emerging Markets magazine, whose latest
issue was released at a meeting of the Inter-American Development Bank in
Guatemala.
"We do not intend to go further and accumulate reserves," Zhou said,
adding the government will "cut a small piece of reserves" for a new
agency to be set up for the management of its massive foreign reserves,
which have swollen because of the trade surplus.
He did not say how much money would be passed to the agency.
China's premier, Wen Jiabao, said last week that plans to form a new
agency to invest part of the country's swollen foreign exchange reserves,
the world's biggest at more than US$1 trillion, would not have an adverse
impact on the US dollar.
China's central bank also said last week it would not significantly
adjust the composition of those reserves. A large part of them are
denominated in dollars.
As the reserves have ballooned on the back of China's record trade
surpluses, demands have grown for part of the hoard to be invested more
aggressively.
Investors have long fretted over Beijing's plans to diversify its foreign
exchange investments because of their potential impact on global markets.
Studies have shown investment by China and other Asian countries in US
bonds has reduced long-term American interest rates by as much as 2
percentage points.
The state of Chinese trade affects such companies as IBM, Wal-Mart and
HSBC.
(For more biz stories, please visit Industry Updates)
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