Posted on 01/14/2008 2:39:41 AM PST by TigerLikesRooster
China forex reserves at 1.53 trln usd at end of 2007 - central bank UPDATE
Fri, Jan 11 2008, 12:25 GMT
http://www.afxnews.com
BEIJING (XFN-ASIA) - China's foreign exchange reserves reached 1.53 trln usd at the end of last year, the central bank said.
That was up 43.3 pct from the 1.0663 trln usd recorded at the end of 2006.
In a statement on its website, the People's Bank of China said that the nation's foreign exchange reserves rose 31.3 bln usd in December alone.
Speculative capital inflows may have been a significant contributor to the growth of China's foreign exchange reserves during 2007 as US interest rates fell, Chinese asset prices rose and the pace of yuan appreciation tempted investors worldwide.
The data also suggest that the China Investment Corporation, the country's new sovereign wealth fund, has not yet received the bulk of its 200 bln usd start-up capital from the central bank.
Foreign exchange reserves in the fourth quarter grew by 94.6 bln usd, the slowest growth in headline reserves this year, down from 101.0 bln usd in the third quarter, 130.6 bln usd in the second and 135.7 bln usd in the first.
This brought total foreign exchange reserve growth in 2007 to 461.9 bln usd, up strongly from 247.5 bln usd in 2006.
Total Chinese foreign exchange reserves were 1.528 trln usd at the end of 2007, securing its position as the biggest holder globally.
Foreign exchange reserves in the fourth quarter were "supposed" to be around 115 bln usd, including 76 bln usd in trade surpluses, around 22 bln usd in foreign direct investment, and around 16-18 bln usd in interest income on existing foreign exchange reserves.
The headline number had been expected to have been around 130 bln usd lower than trade surpluses estimates, FDI, and interest income, as a result of transfers of foreign exchange reserves to the CIC, in exchange for 950 bln yuan in special MOF bonds.
Based on the steady growth in reserves, it is likely that these transfers have either not occurred yet or were phased in evenly throughout the last three months of the year.
Based on the spreadsheets attached to the PBOC data release, October foreign exchange reserves grew 21.3 bln usd in October, 42.0 bln usd in November, and 31.3 bln usd in December.
Lou Jiwei, the head of the CIC and former vice-finance minister, has said on more than one occasion since the fund's launch in September that the foreign exchange reserves have been received from the PBOC.
Also, an unspecified proportion of the three reserve hikes in the fourth quarter totaling 200 basis points were supposedly met with foreign exchange, according to media reports last month.
The measures would require banks to hold onto dollars acquired from exporters for longer periods of time, in order to deposit them with the central bank to meet higher reserve requirements.
In the event that a bank lacks sufficient quantities of foreign exchange to meet the higher reserve requirement, the central bank has apparently offered to sell some banks the foreign exchange from the PBOC's ample reserves.
The net effect of these measures is that fewer dollars are sold to the central bank in the spot market, reducing market-based pressure on the yuan to appreciate.
In addition, commercial banks are now assuming the foreign currency risk of dollars depreciating against the yuan, rather than the central bank.
The dollars placed at the central bank are not deposits, but reflect an increase in commercial banks' net foreign currency positions. As a result, central bank foreign exchange reserves should not rise as quickly.
However, each bank has reportedly received these instructions independently, so the extent to which these measures apply throughout the banking system also remains unclear.
Previous assumptions that around 80 pct of the reserve hikes in the fourth quarter required dollar payments, which would translate into around a 80 bln usd reduction in headline reserves if all 200 basis points of the fourth quarter reserve hikes required dollar settlement.
Hot money may also be pushing up foreign exchange reserve figures again, as analyses of the data have indicated that hot money flows have not been particularly volatile over the past two years.
With Chinese interest rates now higher than those in the United States, and faster rates of yuan appreciation widely expected in the market, it seems logical that hot money inflows into China may be accelerating.
However, measuring the extent of hot money inflows requires knowledge of the magnitude of both transfers to the CIC and dollar settlement of reserve hikes, as well as other factors such as unwinding swaps.
Ping!
Part of that booty is all the African oil that China is stealing.
Sorry, it's the 4th response already, someone HAS to start yelling out those words!
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