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China's Forex Reserve Tops 1.53 Trillion Dollars
    2008-01-11 18:41:12     Xinhua

China's foreign exchange reserve had reached 1.53 trillion U.S. dollars by the end of 2007, up 43.32 percent from 2006, the People's Bank of China announced on Friday.

A total of 461.9 billion U.S. dollars were added to the country's forex reserve in 2007, said the central bank.

In December alone, the forex reserve rose by 31.3 billion U.S. dollars.

China's forex reserve kept a sharp growth in 2007, reaching 1.2 trillion U.S. dollars by the end of March, 1.33 trillion U.S. dollars by the end of June, and 1.43 trillion U.S. dollars by the end of September.

China's soaring trade surplus is the major contributing factor to the forex reserve boom.

Data newly released by the General Administration of Customs show that China's trade surplus surged to a record 262.2 billion U.S. dollars in 2007, representing a 47.7 percent growth over a year earlier.

The huge forex reserve is considered the main reason for excess liquidity in China, as the central bank has to spend quantities of basic money to purchase foreign exchange, thus aggravating the problem of surplus fluidity.

By the end of 2007, the M2 -- a broad measure of money supply, which indicates the monetary demand of the whole of country and possible inflation -- grew by 16.72 percent from a year ago to 40.34 trillion yuan.

The growth rate is 0.22 percentage points lower than the end of 2006, but still higher than the target growth of 16 percent set by the central bank at the beginning of 2007.

A total amount of 330.3 billion yuan was poured into the market in 2007, 26.2 billion yuan more than 2006.

On the other hand, continuous growth of the forex reserve has in fact increased the pressure on appreciation of the Chinese currency, which in turn has exerted greater pressure on value preservation of China's forex reserve.

Value of Chinese RMB against the U.S. dollars has appreciated by over six percent in 2007. The central parity rate of the RMB was 7.2672 to the U.S dollar on Friday.

In a move to make better use of the country's huge forex reserve, China established the China Investment Corporate Ltd. (CIC), the country's state forex investment company in 2007.

The state-owned investment company will invest in overseas financial markets.

The registered capital of 200 billion U.S. dollars of the CIC all comes from the forex reserve of the country, which have poured into the company so far.

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