A powerful buffer

Fast accumulation of foreign exchange reserves had once deeply worried the Chinese government as it continuously glutted the domestic market with excess liquidity in recent years.

Yet, as the world economy gets increasingly exposed to the worsening global financial crisis, it seems that Chinese policymakers should begin to appreciate the strong protection that a huge stock of foreign exchange reserves provides for the national economy.

China's foreign exchange reserves hit a new record of US$1.91 trillion at the end of September, up 33 per cent from the same period last year.