China’s reserves reach record $364.7bn
news.ft.com
By Victor Mallet in Hong Kong
Published: September 29 2003 12:49 | Last Updated: September 29 2003 12:49
China's foreign exchange reserves, sustained by capital inflows and the country's rising trade surplus with the US, increased a further $8.2bn in August to reach a record $364.7bn at the end of the month, the People's Bank of China confirmed on Monday.
Asian trade and reserve figures have become sensitive topics in recent months because US manufacturers and politicians have complained that China and Japan are keeping the renminbi and the yen artificially low to help their exporters compete unfairly in the US market.
Asian central banks, meanwhile, have amassed unprecedented amounts of dollars and other currencies and have become big buyers of the US treasury bills issued to finance the US budget deficit, arousing fears of an unsustainable imbalance in the world economy.
China alone has more than four times the foreign reserves held by the US, and Asia as a whole is sitting on a reserve pile of over $1,670bn.
Economists said the latest Chinese official figures - although showing a slight reduction from the $10bn a month increase in reserves in the first seven months of the year - did not necessarily mean a sustainable slowdown was under way.
The change in reserves depends partly on the irregular inflow of money for foreign direct investment, for which August figures are not yet available. And "hot money" from mainly Chinese banks, companies and investors betting on a revaluation of the renminbi continues to pour into China.
"It's probably premature to say that the flow of hot money is slowing," said Dong Tao, chief regional economist at Credit Suisse First Boston. "We continue to observe very strong interest from people wanting to position themselves in renminbi-denominated assets."
Jonathan Anderson, chief Asia economist for UBS, said: "I expect reserves to continue to rise at a rate of $8bn-$9bn a month. I don't expect things to slow down much."
Beijing has refused to yield publicly to US pressure over its exchange rate, but is expected to permit a slight strengthening of the renminbi against the dollar in the months ahead. The rate is currently pegged in a narrow band at around Rmb8.28 to the dollar.
Economists say the Chinese authorities could simply widen the trading band, although in current conditions the renminbi could quickly hit the upper limit, fuelling speculation about further revaluations. "Allowing the currency to appreciate a small percentage - that's only going to invite more pressure," said Mr Tao. |
