China's foreign-exchange reserves, the world's largest, climbed to a record $1.33 trillion at the end of June, increasing pressure on the government to allow faster gains by the yuan.
Currency holdings excluding gold rose 41.6 per cent from a year earlier, the People's Bank of China said on its Web site. That was a faster pace than the 37 percent gain in the first quarter. The total was $1.2 trillion at March 31. China's trade surplus surged to a record in June, adding to export earnings that are driving up currency reserves and complicating efforts to prevent the economy overheating. The yuan rose today, completing its biggest two-day gain against the dollar since a July 2005 revaluation.
China is setting up a fund to manage part of its currency reserves and spent $3 billion buying a stake in New York-based buyout firm Blackstone Group LP. China owns $414 billion of US Treasuries, the second-largest holding after Japan. As much as 70 per cent of the reserves may be in dollar-denominated assets, analysts say. “China's foreign reserves are too big and mopping up the liquidity that fuels inflation and asset bubbles is an administrative headache,'' said Simon Derrick, chief currency strategist at Bank of New York in London.
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