Reporters' Log

Forex reserves likely to be hot topic

By Xin Zhiming (China Daily)
Updated: 2009-02-25 07:46

Policymakers are set to discuss plans to use the country's massive $1.95 trillion foreign exchange reserves at the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) meetings next month, experts said.

Analysts have warned that the strengthening dollar will not sustain as the US government is poised to issue more treasuries and pump more liquid into the financial system to bail out the fast-sliding economy.

Related readings:  Making the most of forex reserves  Chinese forex assets safe  China urges security, liquidity upon forex reserves  Chinese imports to get forex fund boost

It is important for China to avoid piling up more US Treasuries and begin to buy more energy and resource products while their prices are relatively low, said Zhang Ming, a researcher with the Institute of Finance and Banking at the Chinese Academy of Social Sciences.

The global financial crisis, which is still unfolding its unfathomable impact on the world economy, is set to dominate the annual meetings as China's annual economic growth dipped to 9 percent in 2008 from 13 percent in 2007.

Deputies to the NPC and the CPPCC are expected to discuss ways to take more effective, if not more forceful, measures to sustain China's economic growth and prevent a hard landing after the country released its massive 4 trillion yuan ($586 billion) economic stimulus package in November.

"The most important topic at the meetings would be how the Chinese economy would fare amid the worsening global financial crisis," said Dong Xian'an, macroeconomic analyst with the China Southwest Securities.

"People are curious if China's economy would undergo a V-shaped recovery or go through an L-shaped or even more complicated W-shaped cycle," he said.

To boost the economy, the most effective method may be to "cut taxes for both enterprises and individuals to stimulate domestic demand" at a time when exports have slumped, he suggested, adding that tax cut plans would be one of the most interesting topics at the meetings.

"While implementing large-scale investment plans, the government needs to cut taxes," said Iris Chen, a resident of Beijing. "It would be crucial in encouraging us to spend.

"Job losses are another topic I would be interested in," Chen said.

A survey of 100 domestic economists by the National Bureau of Statistics shows that their biggest concern about the Chinese economy is unemployment in 2009.

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