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China's forex reserves down in February

Latest update : 2009-04-11

At the end of February, China's forex reserves - the largest in the world- fell to 1,9121 trillion dollars from 1,9135 trillion a month earlier, China's central bank announced on Saturday. Most of China's reserves are invested in US Treasury bonds.

AFP - China's forex reserves, the largest in the world, fell to 1.9121 trillion dollars at the end of February, from 1.9135 trillion a month earlier, the central bank announced Saturday.

At the end of March, the country's forex reserves rose to 1.9537 trillion dollars, up from 1.946 trillion in December, the bank said on its Internet site.

China has invested most of its vast reserves in US dollars, such as safe but low-yielding US Treasury bonds, but has tried to diversify its investments to improve its returns.

There are differing interpretations over the variations in the Asian giant's reserves.

Agricultural Bank of China economist He Zhicheng recently estimated Chinese losses at 80 billion dollars between August and February due to falling stock markets and exchange rate fluctuations.

Some say one of the reasons for the fall could be a massive capital outflow, pointing out that the movement in the reserves is lower than that in the trade surplus and direct foreign investment.

While China has stated its wish to diversify its reserves and also called for the creation of a new international reserve currency, it should nevertheless continue to put them in US Treasury bonds, according to specialists.

China, the top holder of US Treasury bonds with 739.6 billion dollars as of January, has expressed concern over its investment as the world's largest economy battles a deep recession.

In a bid to diversify, China in 2007 set up a sovereign wealth fund, the China Investment Corporation, charged with managing 200 billion dollars of the nation's forex reserves.

That corporation's investments have now come across as being badly timed, with huge losses sustained on a number of high-profile transactions, including shares in troubled financial giants Morgan Stanley and Blackstone.
 

Date created : 2009-04-11

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