BUSINESS

China’s foreign reserves surge past USD 3 trillion

China’s foreign reserves have surged past USD 3 trillion, driven by currency controls that Washington and other governments complain are distorting trade and hampering a global recovery, ABC News informs. Chinese reserves, by far the world’s biggest, soared 24.4 percent over a year ago to USD 3.04 trillion at the end of March, the central bank reported Thursday. The reserves are the result of Beijing’s massive purchases of dollars and other foreign currency to restrain the rise of its yuan as export revenues and investment pour into its economy. In freer trading, that flood of cash would push up the yuan, making Chinese exports more expensive abroad. Washington and other governments want an end to the controls, which they say give China’s exporters an unfair price advantage. They say that swells its multibillion-dollar trade surplus and hurts foreign competitors at a time when other countries are struggling to create jobs following the global crisis.

The International Monetary Fund (IMF) added to pressure this week for Beijing to ease the controls that fuel of the growth of its reserves, citing them as a factor that might hamper a global recovery. “The currency of China still appears substantially weaker than warranted by medium-term fundamentals,” the IMF said in a report. It said that unless Beijing allows a more market-driven exchange rate, “the recovery will stand on increasingly hollow legs over the medium term.” Some U.S. lawmakers want sanctions on China if Beijing fails to act. Pressure for such action abated while the two governments cooperated to end the global crisis but demands have revived as trade recovers. Many economists expect Beijing to let the yuan rise faster to cool inflation that hit 4.9 percent in February and is believed to have accelerated in March. A stronger yuan would make imported oil and other foreign goods cheaper, easing pressure for prices to rise. But officials including Premier Wen Jiabao have ruled out a rapid increase, saying that might hurt Chinese companies and cost jobs, adding to social tensions. China’s reserves are nearly triple those of second-place Japan, which reported USD 1.1 trillion as of March 31.

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