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China's forex reserves increase to US$711bn
Updated: 2005-07-15 06:33

China's foreign exchange reserves increased by just over US$100bn in the first six months of this year to US$711bn, nearly double the rate at which its store of overseas currency rose in the same period last year.

China's foreign reserves are on track to break US$1,000bn by June next year if they continue to expand at the current rate, according to Stephen Green, an economist with Standard Chartered in Shanghai.

The build-up in reserves increases the pressure on the People's Bank of China, the central bank, and its efforts to control monetary supply and inflation, and will fuel an already intense debate about whether Beijing should revalue its currency, the renminbi, now pegged to the US dollar.

The rapid build-up of foreign reserves in recent months has been driven primarily by a swelling trade surplus and strong foreign investment.

Speculative capital inflows, much of it banking on a revaluation of the Chinese currency, are also contributing to the build-up, but not to the extent that they were late last year.

"Hot-money inflows appear to be easing," said Ben Simpfendorfer, an economist with JP Morgan.
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