A spokesman for China's State Administration of Foreign Exchange Friday denied reports by foreign press that China has reduced large amounts of its foreign exchange reserves in the US dollar, saying that the reports are totally groundless.

In response to questions from the press, the spokesman said that the currency structure of China's foreign exchange reserves and the management of it are based on a scientific foundation, with consideration given to the actual conditions of the country's economic development, foreign trade payment and foreign debt makeup, as well as the situation of the capital market.

"We pay high attention to the changing trend in the international foreign exchange market, but we will not readjust the currency makeup of the foreign exchange reserves simply because of short-term market fluctuations," said the spokesman.

As a highly responsible investor in the international market, China always works consciously to maintain the safety and stability of the international market and it's definitely impossible for China to participate in foreign exchange rate speculation, he added.

China's central bank "in sound financial condition"

China's central bank is "in sound financial condition," thanks to its strategies and achievements in managing the country's foreign exchange reserves, said the spokesman. "So far as I know, the People's Bank of China is not in the red as reported by some media".

China's foreign exchange reserves have rocketed to more than 500 billion US dollars on the back of the inflow of huge foreign direct investment, trade surpluses and possible inflow of speculative funds betting on the appreciation of the local currency, the renminbi yuan.

But the spokesman said the reserves were put into the international financial markets to make earnings as they should be, instead of being set idle.

China's strategies and achievements in managing the foreign exchange assets are highly honored by central banks around the world, he added.

The spokesman acknowledged that the holding of foreign exchange reserves will definitely carry some cost. Any central bank has to bear financial costs in currency policy operation, he said.

"But if the entire economy or financial system entails shocks or even crises, the whole nation will pay dozens, hundreds of times over," the spokesman noted.

To set a rational scale of foreign exchange reserves is a complicated issue for any country. China's central bank holds the foreign exchange reserves with the fundamental aim to safeguard the macro-economic stability -- which is in the favor of the nation's basic interests, he said.

By People's Daily Online