The central bank said yesterday that the country will not sell
large amounts of US dollar-denominated assets to diversify its
foreign exchange reserves.
The People's Bank of China also warned of a risk of rising
inflation and a rebound in investment as the economy steamed ahead
in the first quarter, growing by 11.1 percent year on year.
Authorities have said the country will diversify part of its
foreign exchange reserves, which amounted to US$1.02 trillion by
the end of March and are believed to be invested mainly in dollar
bonds.
The central bank said it will mainly address the issue of newly
added reserves by widening the foreign currency investment channel
and reaffirmed the importance of its US dollar-denominated assets.
They will remain an important part of China's outbound investment,
the bank said in its monetary policy report for the first quarter,
which was published on its website yesterday.
The bank also said it would keep the yuan basically stable at a
reasonable level.
The bank warned in the report that the country faced the risk of
inflation and of a rebound in investment, and that it must prevent
the economy from overheating.
In the first quarter, urban fixed asset investment grew by 25.3
percent year on year, 0.9 percentage points faster than in the
first two months. Meanwhile, the consumer price index rose by 2.7
percent year on year, but in March the index grew by 3.3 percent,
bypassing the alarm level of 3 percent set by the central bank.
In another development, the State Administration of Foreign
Exchange (SAFE) announced yesterday that the country's current
account surplus hit US$249.9 billion last year, an increase of 55
percent over the 2005 level of US$160.8 billion.
The jump came mainly from the increase in the trade of goods,
which reached US$217.7 billion, up 62 percent year on year, the
foreign exchange regulator said on its website.
The surplus in the country's capital and financial account
reached US$10 billion, down 84 percent. The SAFE attributed the
fall to the strong growth in outbound securities investment.
It gave no figures for last year's overall balance of payments
surplus.
(China Daily May 11, 2007)