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China sees no need for great FX reserves shift
Sunday, September 17, 2006
SINGAPORE -- China has no need to make a big change in the composition of its $954.5 billion stockpile of reserves, the country's foreign exchange regulator said in remarks published on Sunday.
Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told the publication Emerging Markets that China had already shifted some of its foreign currency reserves out of the dollar, diversifying most recently into the South Korean won.
"Until now we haven't made a huge adjustment to our reserves composition because China's trade is largely in U.S. dollars," Hu was quoted as saying.
The dollar as a consequence constitutes a large chunk of the currency basket against which China manages the yuan, "so there's no need to shift greatly from this", she added.
Emerging Markets is being published in conjunction with the annual meetings of the International Monetary Fund and World Bank. The paper did not say when it interviewed Hu.
She said diversification was a long-standing portfolio management practice for China that predated the scrapping of the yuan's decade-old dollar peg in July 2005 and switch to a managed float.
"Over the past few years, we have already diversified our reserves away from exclusively U.S. dollar to other currencies -- euro, yen and we have also moved now to the Korean won -- so that's already evidence of diversification," she was quoted as saying.
China does not disclose the breakdown of its reserves, the largest stash in the world. Bankers assume that at least two-thirds of the reserves is invested in dollar assets.
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