Saturday, October 14, 2006
China’s FX reserves flirt with $1 trillion mark
BEIJING: China’s foreign exchange reserves, the biggest stash in the world, have swollen to almost $1 trillion on the back of the country’s record trade surpluses.
The central bank said on Friday that the reserves grew $46.8 billion in the third quarter to $987.9 billion about $760 for every Chinese.
It was the smallest quarterly rise this year, following increases of $66 billion in the April-June period and $56.2 billion in the first three months, but the pace of accumulation means the reserves will pass the $1 trillion mark before long.
“It has fallen slightly short, but they are still increasing quickly and they are undoubtedly going to reach $1 trillion by the end of the year,” said Paul Cavey, chief China economist with Macquarie Securities in Hong Kong.
China’s reserves have ballooned in recent years as the central bank, in order to hold own the yuan, has bought most of the dollars generated by a growing trade surplus, inflows of foreign direct investment and speculative capital. In all of 2005, the reserves swelled by $209 billion.
By these yardsticks, China is sitting pretty. Its reserves are enough to fund 14 months of imports and it could pay off its short-term debts about 6 times over. But the huge stockpile brings its own problems. It floods the banking system with cash that is fuelling an investment binge and makes it difficult to rein in money growth.
The central bank has been battling to do so, by raising interest rates and requiring banks to tie up more deposits in reserve, and figures on Friday suggested the tightening is working. Annual growth in the broad M2 measure of money supply slowed in September to 16.8 percent, the slowest pace since July 2005, from 17.9 percent in August. Annual loan growth also slowed, to 15.2 percent in September from 16.1 percent in August.
http://www.dailytimes.com.pk/default.asp?page=2006\10\14\story_14-10-2006_pg5_21
China’s FX reserves flirt with $1 trillion mark
BEIJING: China’s foreign exchange reserves, the biggest stash in the world, have swollen to almost $1 trillion on the back of the country’s record trade surpluses.
The central bank said on Friday that the reserves grew $46.8 billion in the third quarter to $987.9 billion about $760 for every Chinese.
It was the smallest quarterly rise this year, following increases of $66 billion in the April-June period and $56.2 billion in the first three months, but the pace of accumulation means the reserves will pass the $1 trillion mark before long.
“It has fallen slightly short, but they are still increasing quickly and they are undoubtedly going to reach $1 trillion by the end of the year,” said Paul Cavey, chief China economist with Macquarie Securities in Hong Kong.
China’s reserves have ballooned in recent years as the central bank, in order to hold own the yuan, has bought most of the dollars generated by a growing trade surplus, inflows of foreign direct investment and speculative capital. In all of 2005, the reserves swelled by $209 billion.
By these yardsticks, China is sitting pretty. Its reserves are enough to fund 14 months of imports and it could pay off its short-term debts about 6 times over. But the huge stockpile brings its own problems. It floods the banking system with cash that is fuelling an investment binge and makes it difficult to rein in money growth.
The central bank has been battling to do so, by raising interest rates and requiring banks to tie up more deposits in reserve, and figures on Friday suggested the tightening is working. Annual growth in the broad M2 measure of money supply slowed in September to 16.8 percent, the slowest pace since July 2005, from 17.9 percent in August. Annual loan growth also slowed, to 15.2 percent in September from 16.1 percent in August.
http://www.dailytimes.com.pk/default.asp?page=2006\10\14\story_14-10-2006_pg5_21
