China wants to head off foreign reserve growth

Chandi Dharmaratne

BEIJING, Sept 5 (AFP) – China’s forex reserves rose further to hit 954.5 billion dollars at end-July but they must not be allowed to grow much more because of the upward pressure they put on the yuan, Vice President Zeng Qinghong said in an article Tuesday. The latest figure translates into 30.3 percent growth from 732.7 billion dollars at the end of July 2005 and places China well on track to hold an unprecedented one trillion dollars in forex reserves by the end of the year.

China’s foreign reserve holdings, already the biggest in the world, hit 941.1 billion dollars at the end of June, a 32.4 percent increase from a year earlier, the central bank reported in July.

Zeng, writing in an article published on the website of the official Study Times, said China will take measures to ensure that there is no further significant rise in the reserves.

“The foreign exchange reserves have reflected China’s growing economic power but on the other hand they have increased exchange rate risks and added upward pressure on the yuan,” he said in the article. “We will take comprehensive measures to avoid further significant growth in the foreign exchange reserves,” he added.