China warns on impact of renminbi revaluation
(AP)
Updated: 2005-12-01 15:19

The rapid build-up in China's foreign exchange reserves should slow as a result of the revaluation this year of the renminbi, the central bank said on Wednesday.

China's central bank reiterated it had no timetable for full convertibility of the yuan, a day after the US Treasury stopped just short of naming Beijing a currency manipulator. [AFP]

The level of China's foreign exchange holdings, which had reached $769bn by the end of September, is one of the most closely watched barometers of structural change in the local economy and the exchange rate system.

China's foreign exchange levels have global implications, as a large amount of the money is invested overseas in US Treasuries.

The statement about the impact of the revaluation came in the form of an interview with an unnamed People's Bank of China official in the China Securities Journal, an official newspaper. "The growth rate of foreign exchange reserves will be slowed slightly," said the official.

China dropped its peg to the US dollar in July and revalued the renminbi by 2.1 per cent, the first step in what the government said was a move to a more flexible exchange rate system.

The small change, and the likelihood of no further large revaluations in the short term, have led some analysts to conclude that capital inflows into China speculating on a higher renminbi would ease.

China's foreign exchange reserves grew by nearly $200bn in 2004, with the largest surge coming in the final quarter of the year.

China yet to release figures for October and November, the central bank official's statement raises the possibility that the inflow in the final quarter this year will not be nearly as high as last year.