Economist suggests 'slight increase' in dollar reserve

(Xinhua)
Updated: 2008-11-23 08:59

Guangzhou - What China can do for the world is not to sell out its massive dollar reserve, but slightly increase its hold of the currency to give reasonable support to the US effort to save its economy, said a senior economist on Saturday.

It is indeed difficult for China to handle its huge forex reserve, as the US currency has already depreciated 20 percent against the Chinese yuan, said Cheng Siwei, well-known economist at a financial forum held in Guangdong.

"China would suffer from losses if it sells off the dollar, so our strategy should be not to sell, but to slightly increase dollar reserve," said Cheng, also former vice-chairman of the Standing Committee of the National People's Congress (NPC).

Cheng made the remarks amid increasing concern that China might use its forex reserve to finance its 4-trillion-yuan stimulus plan. China held 1.9 trillion dollars worth of forex reserve by September this year.

China "can only afford to do what is corresponding to its level of development and national power amid a global crisis," said Cheng.

"We should be prudent as to how to deal with our forex reserve, " said Cheng, noting that China, despite its large size of economy, has its gross domestic product (GDP) accounting for only 6 percent of the world's total, and its per capita GDP ranking falling out of the top one hundred list.