Central bankers said the prospective strength of the euro made sizable reserves vital and China will increase its holdings next year.

China is not worried by fluctuations and slides in the currency's value, Guo Shuqing, vice-governor of the People's Bank of China, was quoted by Wednesday's China Daily as saying.

He said the exchange rate is "inherently stable," because he believed that in the medium and long term, the euro, backed by the European Union's (EU) economic strength, will be a fairly stable currency.

Stocks of the euro have been growing in China's foreign reserves, Guo, also director of the State Administration of Foreign Exchange (SAFE), told a luncheon sponsored by the EU Chamber of Commerce Tuesday.

Underpinning China's support of the euro was the currency's role in the international currency system, the width and depth of the European capital market and the inherent stability of the exchange rate of the single currency.

The latest report showed that China's foreign reserves stood at 203 billion U.S. dollars at the end of October.

Guo said China's trade surplus is likely to shrink in the early years following its entry into the World Trade Organization, as growth in imports is expected to outpace that in exports.

However he said the outlook for international balance of payments is optimistic, and the exchange rate of the Renminbi will remain "basically stable," as China becomes more attractive to foreign capital.

(Xinhua News Agency November 21, 2001)