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Rapid growth of foreign exchange reserves might lead to RMB appreciation pressure |
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15:07, July 16, 2009 |
Surging forex reserve marks inflow of international capital
More foreign exchange reserves should be in private hands
China's foreign exchange reserves have again picked up momentum since March this year increasing by 177.87 billion USD in the second quarter. By the end of June, the balance of China's foreign exchange reserves reached 2.13 trillion USD. At the end of March this year, China's reserves accounted for 29.9 percent of the world's total.
The strong growth of foreign exchange reserves in the second quarter indicated that, on the one hand, the risk of a reverse balance of international payments that worried the market has reduced, and on the other, it is still difficult for China to improve its balance of international payments.
As the central bank needs to put in an equivalent value of renminbi when buying foreign exchanges, foreign exchange reserves' faster growth indicated that the central bank also put in more renminbin funds in at a faster pace. Data showed that foreign exchange reserves in March, April and May this year used renminbi funds amounting to 97.4 billion yuan, 163.8 billion yuan and 286.9 billion yuan, respectively.
As China's economy is likely to be first in the world to recover, the nation will continue to attract more international capital, leading to rapidly growing foreign exchange reserves, said Ding Zhijie, deputy dean of the School of Banking and Finance at University of International Business and Economics.
Meanwhile, as the US dollar's depreciation is a major reason for the rapid growth of foreign exchange reserves during the second quarter, in the near future it will slow down because there is little room left for the US dollar's depreciation. "With the continuous rapid growth of foreign exchange reserves, pressure for renminbi's appreciation might resurface," said Ding.
By People's Daily Online
http://paper.people.com.cn/rmrb/html/2009-07/16/content_296873.htm
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