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China's forex reserve tops $1.68 tln
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17:01, April 11, 2008

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China's foreign exchange reserve reached 1.68 trillion U.S. dollars at the end of March, up 39.94 percent from the same period last year, the People's Bank of China announced Friday.

A total of 153.9 billion dollars was added to the forex reserve in the first quarter of 2008, an increment of 18.2 billion dollars more than the same period a year ago, said the central bank.

The growth of forex reserve has been slowing since the beginning of this year, according to Xinhua's calculation.

The country's forex reserve rose about 60 billion dollars in January and 57 billion dollars in February. In March, the reserve rose 35 billion dollars, 9.7 billion dollars less than the same month of last year.

Meanwhile, the nation's trade surplus was shrinking. It went down 10.8 percent in the first quarter from the same period last year.

The latest General Administration of Customs data said the country's trade surplus slid to 41.42 billion dollars in the first three months this year.

Arbitrage on the rising yuan and the interest rate gap between the Chinese currency and U.S. dollar was a major factor contributing to the forex reserve boom in the first quarter, said Yin Jianfeng, a researcher at the Finance Research Institute of the Chinese Academy of Social Sciences (CASS).

As a move to curb the country's excessive liquidity, the central bank raised the benchmark interest rate six times in 2007,while the U.S. Federal Reserve had cut the interest rate six times by an accumulated 3 percentage points since September to stimulate fluidity.

On Thursday, the yuan breached the 7 yuan mark for the first time since the government unpegged it from the U.S. dollar in 2005. It had gained 4.47 percent this year, or 18.27 percent from 8.2765 yuan against the greenback before the new currency regime was imposed.

Yin said the real reasons behind the monthly slowdown were still not clear, but a possibility was the central bank had enhanced supervision or constraint on the arbitrage.

The central bank should be cautious and take effective measures to increase the flexibility of the yuan to combat expectations for a stronger yuan, said Tan Yaling, a Bank of China researcher.

By the end of March, the M2 -- a broad measure of money supply -- grew by 16.29 percent from a year ago, 0.45 percentage point more slowly than the end of last year and 1.19 percentage points slowly than the end of February.

"The tight monetary policy has taken effect and the financial situation is stable," said the central bank in a circular posted on the official website.

According to statistics from the central bank, the loan balance of RMB reached 27.5 trillion yuan by the end of March, up 14.78 percent from a year ago. The growth rate is 1.32 percentage points lower than the end of last year and 0.95 percentage points lower than the end of February.

A total of 1.33 trillion yuan was added to the RMB loan balance in the first quarter, 89.1 billion yuan less than a year ago. In March alone, 283.4 billion yuan was added, a decrement of 158.3 billion yuan from last March, according to the central bank.


Source:Xinhua



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