China's forex reserves exceed $900 bln (Reuters) Updated: 2006-06-13 07:12 China's foreign exchange reserves, the world's
largest, have risen above $900 billion as a result of the nation's growing trade
surplus, a senior government official said on Monday.
The official said China's foreign exchange reserves had hit a new high
following several consecutive years of trade surpluses.
"China's reserves have already exceeded $900 billion," he told an
off-the-record forum. "Imbalances in international payments have triggered some
new problems which deserve our attention."
The authorities needed to fine-tune policy to tighten liquidity, the official
said.
"It is necessary to take some targeted fine-tuning measures under the
condition that monetary and fiscal policy be kept basically stable. Currently
the priority is to control liquidity," he said.
Many analysts expect China to raise bank reserve requirements soon to help
curb excess liquidity that has fuelled a destabilising credit boom. Some think
the central bank may resort to raising interest rates for a second time this
year.
China's foreign exchange reserves rose to a record $875.1 billion by the end
of March on the back of a surge in its trade surplus and an increase in foreign
direct investment.
Earlier on Monday, China said it had raked in a record monthly trade surplus
of $13.0 billion in May.
The Chinese economy had continued to expand at a fast clip and could easily
grow by over 9 percent in 2006, the official said.
Excessive growth in both fixed-asset investment and credit and the country's
widening trade surplus remained key problems for the economy, he said.
Fixed-asset investment for the first 5 months was likely to have grown around
30 percent on the year, he said.
"Indeed the excessive growth and trade imbalances will bring new challenges
for the overall economy if we don't pay enough attention and allow them to
evolve," he said.
The official said consumer price inflation in China was likely to remain
subdued in the near-term and its ability to rise further would depend to a large
extent on government moves to liberalise utility prices.
China reported on Monday that its consumer price index had risen 1.4 percent
on the year in May, slightly higher than the 1.2 percent seen in
April.
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