China fears depreciation of $2.45 trillion of reserves still heavy in dollars

China fears depreciation of $2.45 trillion of reserves still heavy in dollars

By Angela Monaghan, Economics Correspondent
Published: 6:00PM BST 03 Sep 2010 


China offered a rare insight into its foreign exchange reserves with confirmation that the vast majority are held in dollars.

The Chinese Government holds the largest stockpile of currency reserves at $2.45 trillion , with 65pc held in dollars, 26pc in euros, 5pc in pounds, and 3pc in yen. 

The report was published in official newspaper the China Securities Journal and confirmed analysts' estimates that about two-thirds of the reserves are invested in dollars. Until now the allocation of China's foreign exchange reserves was considered a state secret. 


Separately Hu Xiaolian, a vice governor with the People's Bank of China, warned that depreciation was a risk for the foreign exchange reserves held by developing countries. 

"Once a reserve currency's value becomes unstable, there will be quite large depreciation risks for assets," she wrote in an article that appeared in the latest issue of China Finance, a central bank magazine. 

"The outbreak and spread of the global financial crisis has highlighted the inherent deficiencies and systemic risks in the current international currency system," she said. 

"A diversified international currency system will be more conducive to international economic and financial stability," she added, calling for greater cross-border use of the yuan.
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