China Says Currency Is Main Focus
Sunday, 28 February 1999
B E I J I N G (AP)
MAINTAINING A balance of international payments and protecting
the stability of the currency are the two main goals in 1999 for
China's State Administration of Foreign Exchange, a Chinese
newspaper reported Sunday.
Li Fuxiang, the foreign exchange bureau's director, also vowed to
continue the government's clampdown on illegal foreign exchange
trade, according to the Financial News, the official publication of
the People's Bank of China, the central bank.
Last year, an outflow of hard currency from China eroded foreign
exchange reserves as fears mounted that Beijing might devalue its
currency to boost exports.
The government responded by tightening controls on trade
financing, a major channel for converting the Chinese yuan into
foreign exchange. Beijing also adopted a tougher stance toward
the black market, making unofficial currency trade a criminal
offense.
As a result, reserve levels rebounded, with China reporting $145
billion in foreign exchange reserves at the end of 1998, up $5
billion from the previous year.
Chinese leaders, who pledged not to devalue the yuan in 1998
and reiterated that stance for this year as well, want to minimize
points of weakness for the currency.
Officials point to massive reserves, second largest in the world
next to Japan's, as proof that it can keep the yuan stable. China
also recorded a $43.59 billion trade surplus last year.
But stagnant exports, hurt by Asia's slow economic recovery, will
make it difficult to match the same level in 1999.
Li, the State Administration of Foreign Exchange director, said
China would try to make management of foreign exchange more
efficient as part of efforts to bolster foreign trade and investment.
In a separate report Sunday, Chinese analysts said China should
increase its gold reserves to reduce reliance on the U.S. dollar and
to hedge against financial risks.
"If there are problems with the dollar, there will be an
international catastrophe," said Liu Shan'en, deputy director of
the Gold Economic Development Research Center. "An increase
in our country's gold reserves is necessary," the Business Weekly
quoted Liu as saying.
China doesn't disclose what portion of its foreign reserves are
held in dollars, but officials acknowledge the bulk of it is invested
in U.S. treasuries.
By contrast, China's gold reserves represented only 2.6 percent of
total foreign reserves. |
