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Last updated at: (Beijing Time) Thursday, November 22, 2001

China to Buy More Euro

China has been snapping up euros to put in its foreign exchange reserves ahead of the single currency's debut in January next year. In the medium and long term, the euro, backed by the European Union's (EU) economic strength, will be a fairly stable currency.


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China has been snapping up euros to put in its foreign exchange reserves ahead of the single currency's debut in January next year. Central bankers said the prospective strength of the euro made sizable reserves vital and China will increase its holdings next year.

China is not worried by fluctuations and slides in the currency's value, Guo Shuqing, vice-governor of the People's Bank of China, since the exchange rate is "inherently stable". He also believed that in the medium and long term, the euro, backed by the European Union's (EU) economic strength, will be a fairly stable currency.

Euro Stocks Growing
Stocks of the euro have been growing in China's foreign reserves, Guo, also director of the State Administration of Foreign Exchange (SAFE), told a luncheon sponsored by the EU Chamber of Commerce Tuesday.

Underpinning China's support of the euro was the currency's role in the international currency system, the width and depth of the European capital market and the inherent stability of the exchange rate of the single currency.

The latest report showed that China's foreign reserves stood at 203 billion U.S. dollars at the end of October.

Guo said China's trade surplus is likely to shrink in the early years following its entry into the World Trade Organization, as growth in imports is expected to outpace that in exports.

However he said the outlook for international balance of payments is optimistic, and the exchange rate of the Renminbi will remain "basically stable," as China becomes more attractive to foreign capital.

Exhibition on Euro
An exhibition entitled "The Euro Is Here" was opened Tuesday evening in the China Numismatic Museum and it will go on until November 27..

Jointly sponsored by the European Central Bank and the People's Bank of China, the exhibition is the first to display genuine euro in a country outside Europe, and will be the only such exhibition held before the euro goes into circulation on January 1, 2002.

A spokesman for the exhibition said that after more than 10 years of preparation, 12 European countries are to give up their national currencies and adopting a common currency - the euro. Over a period of just a few days at the beginning of 2002, more than 14 billion euro banknotes and 50 billion euro coins will replace almost as many old national currency banknotes and coins, affecting over 300 million people.

The exhibition aims to explain the significance of the euro in the unification process of Europe, and to let visitors know the background of the birth of the euro and its impact on Europe and the world.

Euro Introduction
On January 1, euro banknotes and coins will be introduced, marking the conclusion of the changeover to the euro that started almost three years ago.

The euro's role as an international financing and investment currency has already increased substantially since it was introduced in money and financial markets of the 12 member countries on January 1, 1999, said Christian Noyer, vice-president of the European Central Bank (ECB).

But Noyer said the ECB takes a neutral stance in the internationalization of the euro, which ends the national currencies of member countries and their economic implications.

"This means it neither pursues the internationalization of the euro as an independent policy goal, nor does it attempt to hamper its use by non-residents," he said.



What is the euro?
The euro is the single currency of the European Monetary Union, which was adopted by 11 Member States from 1 January 1999. The 11 Member States are Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland. Greece became the 12th Member State to adopt the Euro on 1 January 2001. The name "euro" was chosen by the European Heads of State or Government at the European Council meeting in Madrid in December 1995.

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