Growth in China's forex reserves may slow in first quarter

16:46, April 07, 2010      

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The People's Bank of China (PBOC) will release figures concerning China's late March foreign exchange reserves next week. Experts predicted that after last year's hike, China's foreign exchange reserves may continue on the upward trend in the first quarter of this year, but the growth may slow down.

According to analysts, China's trade surplus has been narrowing since the beginning of this year. In March, China might have encountered a trade deficit and at the same time, the growth in China's foreign direct investment was limited despite seven consecutive months of increase. Under this condition, growth in China's foreign exchange reserves may slow down in the first quarter of this year.

Figures released by the General Administration of Customs show that China's total import and export value reached 386.4 billion U.S. dollars in the first two months, up nearly 45 percent compared to the same period of last year. Of which, the export value was 204.1 billion U.S. dollars, up over 31 percent, and the import value was 182.3 U.S. dollars, up almost 64 percent, and the trade surplus was 21.8 billion U.S. dollars, down over 50 percent.

Figures relating to China's trade surplus in March have not yet been released, but several high-ranking government officials have stated that China might have encountered a slight trade deficit in March.

Meanwhile, data published by the Ministry of Commerce also indicates that China's foreign direct investment reached over 14 billion U.S. dollars in the first two months of this year, up nearly 5 percent compared to the same period of last year.

The growth in China's foreign exchange reserves not only reflects China's foreign trade and foreign direct investment (FDI), but also reflects China's service trade, cross-border capital flow, the return on foreign exchange reserve-based investment and currency translation. According to banking experts, the above-mentioned factors will not have negative effects or cause a sharp increase in China's foreign exchange reserves as expectations of RMB appreciation do exist.

In the first two months of this year, China's funds outstanding for foreign exchange has grown by 420 billion yuan (about 61.6 billion U.S. dollars) in the first two months of this year.

As for whether or not growth in China's foreign exchange reserves will slow down, relevant officials from the State Administration of Foreign Exchange (SAFE) stated that it is not the right time to comment on this issue. However, he added that a slower growth in China's foreign exchange reserves would be a good thing because China's foreign exchange reserves have been increasing too sharply over past years.

According to the past practice of the PBOC, figures concerning China's late March foreign exchange reserves will be formally released next week.

By People's Daily Online

(Editor:祁澍文)

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