China forex reserves hit $1.76 trln

Analysis

China’s stockpile of foreign exchange reserves, already the largest in the world, increased a record $74.46 billion in April to $1.75666 trillion, a source familiar with the data said on Monday.

The leap surpassed the previous monthly record of $61.6 billion set in January. It was more than three times greater than the $24.3 billion that flowed into China in April from the trade surplus and foreign direct investment -- a strong indication for many economists that speculative capital is still pouring into the country. The source declined to be identified because he is not allowed to speak officially to the media. China’s official foreign exchange reserves have now risen $228.5 billion in the first four months of the year compared with $461.9 billion in all of 2007.

April’s surge -- almost half the Q1 increase of $154 billion -- occurred even though the yuan’s pace of appreciation slowed to a crawl last month, reducing the currency’s short-term attraction to hot-money investors. Economic policy makers at the highest reaches of the Chinese government have met periodically to examine the issue of hot money inflows, which complicate the People’s Bank of China’s (PBOC) task of managing the money supply. The PBOC has to buy most of the dollars that flow into China in order to hold down the yuan’s exchange rate. The central bank then has to sterilise the impact on the money supply by mopping up the domestic currency it creates in the process.

Senior officials reached no firm conclusion at their most recent meeting, agreeing only to keep monitoring the problem, a second source said. Reserves in April grew by more than the combined inflows from China’s trade surplus and FDI for the fourth month in a row. But not all economists pin the blame on speculative inflows. Some say most of the sustained increase can be explained by valuation changes affecting non-dollar holdings, a growing stream of income earned on the reserves stockpile and an explosion of onshore dollar lending.

However, the volume of dollar loans dropped sharply in April, the central bank’s monthly money supply figures showed. The PBOC publishes the reserves data every quarter. The next figures are due in July. (Reuters)

ADVERTISEMENT

Wage growth could return next year Analysis

Wage growth could return next year

Parl't to vote on groundwork for commercial accommodation ra... Parliament

Parl't to vote on groundwork for commercial accommodation ra...

Duncan Graham reelected as BCCH president Appointments

Duncan Graham reelected as BCCH president

Budapest re-launches airport shuttle bus City

Budapest re-launches airport shuttle bus

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.