Economy

China says stronger yuan does not hurt forex reserves

(Xinhua)
Updated: 2011-05-07 07:44

BEIJING - A rising yuan will not cause heavy losses to China's $3 trillion foreign exchange reserves, the nation's forex regulator said on Friday, refuting some media reports that a stronger yuan against the US dollar had led to heavy losses of the huge forex reserves.

Investment returns of China's forex reserves have maintained steady for years, the State Administration of Foreign Exchange (SAFE) said in a statement on its website, in response to some experts' view that a stronger yuan against the US dollar had caused a loss of $271.1 billion since 2003.

"The ratio of our returns is much higher than the inflation rates in the United States, European Union and Japan where the reserves are invested, which boosted the real purchasing power of the reserves," SAFE said.

The annual growth of the Consumer Price Index (CPI), a main gauge of inflation, was 2.4 percent in the United States and 2.1 percent in the European Union during 2000 and 2010. In Japan, inflation dropped 0.2 percent per year.

China has accumulated the world's largest forex reserve of $3.04 trillion by the end of March due to its booming exports over the past decade.

The massive stockpile has fed China's growing needs for forex, but also added inflation concerns as the central bank has to print the same amount of yuan to offset the forex inflow.