No loss to forex reserves over depreciating dollar: China

China today refuted reports that it suffered $271.1 billion loss since 2003 due to dollar depreciation, saying that ratio of the returns on its reserves was much higher than the inflation in US, EU and Japan, where the funds were invested.

Investment returns of China's forex reserves have maintained steady for years, the State Administration of Foreign Exchange (SAFE) said in a statement.

"The ratio of our returns is much higher than the inflation rates in the United States, European Union and Japan where the reserves are invested, which boosted the real purchasing power of the reserves," SAFE said.

The state run China Daily quoted National Development and Reform Commission (NDRC) Head (fiscal and financial policy research division) Zhang Anyuan as saying that it suffered a loss of $271.1 billion on its reserves between 2003 and 2010 due to steady depreciation of dollar against Yuan.

The annual growth of the Consumer Price Index (CPI), a main gauge of inflation, was 2.4% the US and 2.1 percent in EU during 2000 and 2010.

In Japan, inflation dropped 0.2% per year, SAFE said.

The forex changes could only be reflected in the book value of the reserves, not in the real value. A change in the real value will occur when the reserves assets are exchanged for yuan. But China does not have to do that on a large scale, said SAFE, the official news agency Xinhua reported.

As China's forex reserves are denominated by the US dollar, a weaker dollar boosts the book value of the assets, it said.

SAFE also contended that the book value loss of the forex reserves from a rising Yuan are much less than the book gains of the nation's overall financial assets which are denominated by the US dollar.

China had accumulated the world's largest forex reserve of $3.04 trillion by the end of March due to its booming exports over the past decade.

The massive stockpile has fed China's growing needs for forex, but also added inflation concerns as the People's Bank of China (PBOC), the central bank, has to print the same amount of yuan to offset the forex inflow, SAFE said.

PBOC Deputy Governor Yi Gang has said management of the massive forex reserves is getting more challenging.