Zhou Urges Cut In China's Forex Reserves
Source: Bloomberg News |
April 19, 2011, Tuesday
|
Print Edition
Print Edition
CHINA needs to reduce its foreign exchange reserves as they exceed the level the nation requires, central bank Governor Zhou Xiaochuan said yesterday.
The management and diversification of the holdings, which topped US$3 trillion at the end of March, should be improved, Zhou said after a speech at Tsinghua University in Beijing. The rapid accumulation is putting pressure on the People's Bank of China, he said.
The nation's forex reserves rose US$197 billion in the first quarter, reflecting global imbalances that Group of 20 finance ministers agreed last week to address through deeper scrutiny of their economic policies. China's surging holdings are fueling inflation that accelerated last month to the highest in 32 months, prompting the PBOC to boost banks' reserve requirements on Sunday for the fourth time this year.
"Foreign-exchange reserves have exceeded the reasonable levels that we need," Zhou said. "The rapid increase in reserves may have led to excessive liquidity. If the government doesn't strike the right balance with its policies, the build-up could cause big risks."
The management and diversification of the holdings, which topped US$3 trillion at the end of March, should be improved, Zhou said after a speech at Tsinghua University in Beijing. The rapid accumulation is putting pressure on the People's Bank of China, he said.
The nation's forex reserves rose US$197 billion in the first quarter, reflecting global imbalances that Group of 20 finance ministers agreed last week to address through deeper scrutiny of their economic policies. China's surging holdings are fueling inflation that accelerated last month to the highest in 32 months, prompting the PBOC to boost banks' reserve requirements on Sunday for the fourth time this year.
"Foreign-exchange reserves have exceeded the reasonable levels that we need," Zhou said. "The rapid increase in reserves may have led to excessive liquidity. If the government doesn't strike the right balance with its policies, the build-up could cause big risks."
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