Chinese reserves surge past $3 trillion mark

Published on Thursday 14 April 2011 16:00

China's foreign reserves have surged past $3 trillion (£1.8trn), driven by currency controls that foreign governments complain are distorting trade and hampering a global recovery.

Chinese reserves, by far the world's biggest, soared 24.4 per cent over a year ago to $3.04 trillion at the end of March, its central bank reported yesterday.

The reserves are the result of massive purchases of dollars and other foreign currency to restrain the rise of the yuan as export revenues and investment pour in. In freer trading, that flood of cash would push up the yuan, making Chinese exports more expensive abroad.

The IMF added to pressure this week for Beijing to ease the controls that fuel the growth of its reserves, citing them as a factor that might hamper a global recovery.

"The currency of China still appears substantially weaker than warranted by medium-term fundamentals," the IMF said. It warned that unless Beijing allows a more market-driven exchange rate, "the recovery will stand on increasingly hollow legs over the medium term".