|
The dominance of United States
dollars in the mainland's foreign exchange reserves
poses a serious financial risk to the country, the
China Daily
warned.
A likely continuing fall in the dollar's value will cause substantial financial
losses for the mainland unless policy makers reduce the high proportion of
dollars in the country's foreign reserves, the editorial, by Jiang Ruiping,
director of China Foreign Affairs University's Department of International
Economics, said.
The editorial recommended that policy makers trim the ratio of US dollars in the
foreign reserves in favour of the euro and the Japanese yen to avert the impact
of a possible "US dollar crisis'' on China's economy.
"It is becoming more and more evident that the possibility of a further slump of
the US dollar is increasing,'' the editorial said.
"To ward off foreign exchange risks, China needs to readjust the current
structure, increasing the proportion of the euro in its foreign exchange
reserves.''
The recent weakness of the dollar had wiped out more than US$10 billion (HK$78
billion) from the mainland's foreign exchange reserves, the editorial said,
adding that more losses are likely unless the current reserve currency
configuration is altered.
At the moment, US dollars make up two-thirds of the reserves.
The mainland had total foreign exchange reserves of US$483 billion at the end of
July.
While Jiang's editorial portrays the dollar's slide as a threat to China's
foreign reserves, it overlooks the role played by the weaker dollar in fuelling
growth due to the de facto yuan peg.
The yuan is fully convertible only on the trade account, and even then is kept
within a tight band of around 8.2777 to the dollar.
Trade partners including the US and Japan have criticised the yuan peg for
giving China an unfair trade advantage by making its exports cheaper, as the
yuan's value slid in tandem with that of the dollar over the past year.
That has helped power a 35.8 per cent year-on-year rise in exports to US$360.59
billion in the first eight months of this year.
The editorial warned that the investment of most of China's foreign exchange
reserves in US treasury bonds also posed "great political risks''.
But it did not elaborate further on this.
|
