SAFE to keep forex reserves at reasonable level
Print Edition
CHINA will keep its foreign exchange reserves at a reasonable level after accumulating nearly US$4 trillion to rank as the world’s biggest, officials of the State Administration of Foreign Exchange said yesterday.
“China’s foreign currency reserves are of significant importance,” said Huang Guobo, chief economist at SAFE, although he did not elaborate on what would be a safe level of reserves.
China’s foreign currency reserves grew by US$130 billion in the first quarter to a record US$3.95 trillion.
The excessively large foreign exchange reserves would increase domestic money supply and create potential domestic inflationary pressures. They also put more pressure on the central bank to raise reserve requirement ratios, Huang said.
As foreign currency reserves accounted for over 80 percent of the central bank’s assets, there is a mismatch between its assets and liabilities leading to foreign exchange risks, Huang said.
Guan Tao, head of SAFE’s international payments division, said the pace at which the reserves amass will slow as China seeks to cut its trade imbalance and curb hot money inflows.
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