BEIJING - China's huge stockpile of foreign exchange reserves is necessary to
fend off market risks, a government economist said in remarks published on
Tuesday, adding that they were not inflationary and posed little threat to the
China's foreign exchange reserves, the world's largest, rose to $954.5
billion at the end of July, state media said on Monday, citing Vice-President
Many government economists contend that Beijing should seek to slow growth in
its reserves, citing the pressures it has put on monetary policy.
The central bank, in an effort to keep yuan levels steady, buys many of the
dollars generated by the country's large trade surplus and inflows of foreign
Pei Changhong, a researcher with the Chinese Academy of Social Sciences, a
top government think-tank, said China needed abundant reserves to import energy
and other raw materials, support Chinese firms investing overseas, pay its
foreign debts and allow foreign investors to repatriate dividends.
"Considering that China has become a global trade heavyweight, its more than
$900 billion in foreign exchange reserves does not have any obvious negative
impact and we should not be alarmed at this," Pei wrote in the overseas edition
of the official People's Daily.
Pei explained that although the rapid build-up in China's forex reserves
posed challenges to monetary policy, it did not generate any significant
inflationary pressure and was therefore of no big concern.
He said that although it is commonly considered appropriate for a country's
reserves to equal three to six months' worth of imports, China, as a large
developing country, needed more.
He did not spelling out what level of reserves he thought would be suitable.
State media on Monday cited Zeng as saying that China would do more to slow
growth in its forex reserves and widen the uses of the money.