China's Forex Reserves Hit One Trillion Dollars

Figure tops Japan as world's largest.

China's foreign exchange reserves have reached one trillion dollars, according to the State Administration of Foreign Exchange. The reserves stood at $987.9 billion at the end of September.

China's foreign exchange reserves overtook Japan's as the world's biggest in February.

The inflow of foreign direct investment and a continuous stream of money aiming for short-term speculative gains have both helped reserves reach their current size, but booming exports are by far the most important factor. The growth in the reserves is a by-product of the central bank's determination to keep the local currency, the yuan, stable.

The accumulated trade surplus in the first nine months rose to$110 billion, already bigger than the $102 billion recorded for all 12 months of 2005, according to customs data.

The inflow of money puts upward pressure on the Chinese currency, and the central bank has to counteract this by buying up foreign currency, adding to the already bulging reserves.

Copyright Agence France-Presse, 2006

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