SAFE confident on foreign reserve management

08:37, July 07, 2010      

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The State Administration of Foreign Exchange (SAFE) fired back at critics Tuesday, saying that its management of the country's massive foreign currency reserves is sound.

"China's foreign reserve achieved relatively good returns in 2008 and 2009 while the international financial crisis was raging," SAFE said on its website.

"We had avoided big losses and are confident in achieving good, stable returns in the long term," the foregin exchange watchdog said.

China's foreign reserves, the world's biggest, jumped $453 billion, or 24 percent, to $2.4 trillion last year amid the global financial crisis, according to the People's Bank of China, the country's central bank.

Experts believe most of the exchange reserve is in US dollars, Euros and Japanese yen.

China overtook Germany last year as the world's leading exporter and posted a trade surplus of US$19.53 billion in May. In April the surplus was a modest $1.68 billion and the country saw a deficit in March, the first in six years.

China's reserve growth is also driven by its currency controls. The central government needs to buy dollars and other foreign currency that flows into the country in order to manage the yuan's exchange rate.

China's holdings of US Treasuries have nearly doubled in the last two years. Beijing held $421.1 billion in the T-bonds in March 2007, before the financial crisis, compared with Japan's $611.2 billion, which made it the largest Treasury bond holder at that time. China's Treasury holdings peaked at $801.5 billion in May 2009, according to Reuters.

"The value losses of China's foreign reserves caused by yuan revaluation is just a numbers game," said Zhao Xijun, professor and deputy director of the School of Finance of Renmin University. "Our main task is to adjust economic structures and balance international trade in the future."

Source: Global Times


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