China's bulging U.S. dollars in grip implicates risks: expert

A leading economist in China warned the country's hefty foreign exchange reserve will add risks to its fast economic development.

Fan Gang, a member of the monetary policy committee under the People's Bank of China, the central bank, predicted that the country's foreign exchange reserves will break the one trillion U.S. dollar mark in a matter of a month's time.

He said that the economy is showing signs of cooling down, with overheating being reined in as a result of macro-control measures. However, the mounting foreign exchange reserve and excessive trade surplus implicate risks for a healthy growth of the economy.

China's foreign exchange reserves, already replacing Japan as the world's biggest by February, continued its soaring trend, growing 32.37 percent year on year to 941.1 billion U.S. dollars by the end of this June.

He said that the massive capital inflow from overseas is not seeking speculation of the RMB, as most people have believed, but eyeing business opportunities nurtured by the booming economy.

The very modest fluctuation band led by the current managed flotation scheme of RMB, give speculators little space to rake in huge money. China's buoyant economic prospect is what the investors really value, he said.

He holds that an annual two percent hike of the RMB value may be too modest, but a quicker and bigger rise is unacceptable too.

Source: Xinhua