Chinese Foreign Reserves and Reserve Diversification: The News

BEIJING: China’s forex reserves, the largest in the world, fell to 1.9121 trillion dollars at the end of February, from 1.9135 trillion a month earlier, the central bank announced on Saturday.

At the end of March, the country’s forex reserves rose to 1.9537 trillion dollars, up from 1.946 trillion in December, the bank said on its Internet site.

China has invested most of its vast reserves in US dollars, such as safe but low-yielding US Treasury bonds, but has tried to diversify its investments to improve its returns.

There are differing interpretations over the variations in the Asian giant’s reserves.

Agricultural Bank of China economist He Zhicheng recently estimated Chinese losses at 80 billion dollars between August and February due to falling stock markets and exchange rate fluctuations.

Some say one of the reasons for the fall could be a massive capital outflow, pointing out that the movement in the reserves is lower than that in the trade surplus and direct foreign investment.

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