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Strategies & Market Trends : Coming Financial Collapse Moderated -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (765)	5/30/2002 9:36:11 PM
From: TobagoJack	Read Replies (2) \| Respond to of 974

Electorates voting thumbs up on Euro ... biz.scmp.com Friday, May 31, 2002 Euro is on track for expanded foreign exchange reserve role BILL SAVADOVE in Shanghai China is on track to give the euro a greater role in its massive foreign exchange reserves as an alternative to the mighty US dollar, according to a senior European Union financial official. "Financial authorities in China affirmed recently that they have the intention to increase the role of euros as part of their reserve policy," said Rodrigo Rato, chairman of the Euro Group of Finance Ministers. In a speech given in Shanghai to promote the euro, Mr Rato cited news reports as saying it could eventually make up 20 per cent of China's reserves, but he did not confirm that figure. In November, Guo Shuqing, deputy governor of the People's Bank of China, the central bank, confirmed China was buying euros and would raise the proportion of the European currency in its foreign exchange reserves. The euro made its debut on January 1, 1999, and participating countries introduced notes and coins on January 1. China's foreign exchange reserves, the world's second-largest behind Japan, stood at nearly US$233.8 billion at the end of April, state media have reported. The central bank has never revealed the composition of the reserves but the bulk is believed to be held in US dollars, followed by the euro and the Japanese yen. Mr Rato estimated China's reserves would stand at US$225 billion to US$230 billion by the end of this year. China could benefit by linking the yuan to a basket of currencies, including the euro, and issuing bonds denominated in the European currency, he said while on a three-day visit to China and Japan. China's central bank chief Dai Xianglong said in March that the Government was studying a proposal by the International Monetary Fund to link its domestic yuan currency to a basket of currencies, including the euro, instead of just the US dollar. "This would probably contribute to a high degree of stability in China's currency in the medium term," Mr Rato said. Analysts said China needed more flexibility in its rigid foreign exchange regime, especially after its entry to the World Trade Organisation in December last year. China has made stability of the yuan a key platform of its financial policy. The central bank now keeps the yuan virtually pegged to the US dollar at an exchange rate of about 8.28 yuan to US$1. Mr Rato said the size and liquidity of the market made issuing euro-denominated bonds a good alternative, though it was up to the markets and sovereign governments to decide. "The possibility of countries to issue bonds, or debt, denominated in euro is up to them. But certainly the size, and the depth and the liquidity of the euro market gives a chance for countries and for private investors to do that," he said.