Central bank "in sound financial condition"
(Xinhua)
Updated: 2004-12-12 09:50

China's central bank is "in sound financial condition," thanks to its strategies and achievements in managing the country's foreign exchange reserves, said a spokesman for China's State Administration of Foreign Exchange (SAFE) in Beijing Friday.

"So far as I know, the People's Bank of China is not in the red as reported by some media," said the spokesman.

China's foreign exchange reserves have rocketed to more than US$500 billion on the back of the inflow of huge foreign direct investment, trade surpluses and possible inflow of speculative funds betting on the appreciation of the local currency, the renminbi yuan.

But the spokesman said the reserves were put into the international financial markets to make earnings as they should be, instead of being set idle.

China's strategies and achievements in managing the foreign exchange assets are highly honored by central banks around the world, he added.

The spokesman acknowledged that the holding of foreign exchange reserves will definitely carry some cost. Any central bank has to bear financial costs in currency policy operation, he said.

"But if the entire economy or financial system entails shocks or even crises, the whole nation will pay dozens, hundreds of times over," the spokesman noted.

To set a rational scale of foreign exchange reserves is a complicated issue for any country. China's central bank holds the foreign exchange reserves with the fundamental aim to safeguard the macro-economic stability -- which is in the favor of the nation's basic interests, he said.

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