China’s forex reserves top 1.43 trillion dollars

BEIJING, Oct 12, 2007 (AFP) – China’s foreign exchange reserves, already the world’s largest, surpassed 1.43 trillion dollars at the end of September, the central bank said Friday. The figure was up 45.1 percent from a year earlier, the central bank said in a statement posted on its website.

The news came the same day that the government said the trade surplus, the main source of reserve growth, hit 185.7 billion dollars in the first nine months, exceeding the 177.5 billion dollars for all of last year.

China’s forex reserves, which overtook Japan’s for the world’s top spot in early 2006, have also been boosted by foreign direct investment and the inflow of speculative funds banking on short-term investment gains.

About 70 percent of foreign reserves is generally believed to be held in US dollar denominated paper, principally US government bonds.

This has proved a less-than-ideal solution, given not just the low yields on government debt, but also the weakening of the US currency.

To help cope with this problem, the government late last month launched the China Investment Corp., charged with managing about 200 billion dollars of the nation’s reserves. The c