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China's forex reserve tops US$1.43 trillion

(Xinhua)
Updated: 2007-10-12 19:17

China's foreign exchange reserve had reached 1.43 trillion U.S. dollars by the end of September, up 45.1 percent year-on-year, the People's Bank of China announced on Friday.

A total of 367.3 billion U.S. dollars were added to the country's foreign exchange reserve in the first nine months of 2007, said the central bank.

In September alone, the forex reserve rose by 25 billion U.S. dollars.

China's soaring trade surplus is still the major contributing factor to the forex reserve boom.

Data newly released by the General Administration of Customs shows that China's trade surplus for the first nine months of the year has reached185.7 billion U.S. dollars, exceeding the total trade surplus of 177.47 billion U.S. dollars for 2006.

The huge forex reserve is considered the main reason for excess liquidity in China, as the central bank has to spend quantities of basic money to purchase foreign exchange, thus aggravating the problem of surplus fluidity.

By the end of September, the M2 --  a broad measure of money supply, which indicates the monetary demand of the whole of country and possible inflation -- grew by 18.45 percent from a year ago to 39.31 trillion yuan.

The growth rate is 1.39 percentage points higher than the end of June and still higher than the target growth of 16 percent set by the central bank at the beginning of this year.

A total amount of 195.8 billion yuan was poured into the market during the first nine months, 30.2 billion yuan more than the same period of last year.

On the other hand, continuous growth of the forex reserve has in fact increased the pressure on appreciation of the Chinese currency, which in turn has exerted greater pressure on value preservation of China's forex reserve.

The central parity rate of the RMB was 7.5114 to the U.S. dollar on Friday.

In a move to make better use of the country's huge forex reserve, China announced the establishment of the China Investment Corporate Ltd. (CIC), the country's state forex investment company at the end of September.

The state-owned investment company will invest in overseas financial markets.

The registered capital of 200 billion U.S. dollars of the CIC all comes from the forex reserve of the country, which will be obtained by issuing a total of 1.55 trillion yuan special treasury bonds by the Ministry of Finance (MOF).

So far, the ministry has issued more than 700 billion yuan (93.3 billion U.S. dollars) of special treasury bonds, with 600 billion yuan to the central bank and 100 billion yuan targeting the general public. It will issue another 100 billion yuan of treasury bonds by the end of this year.



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