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China foreign exchange reserves top $3.8trn

Beijing - China's foreign exchange reserves, already the world's largest, reached $3.82 trillion yuan at the end of 2013 - a new record - the central bank said on Wednesday.

The end-of-year figure was up from the $3.66trn as at the end of September, according to data published by the People's Bank of China (PBoC).

It came after the country's trade surplus reached $259.75bn last year, up 12.8% on 2012 and its highest since the global financial crisis.

Export markets

Growth in China's vast reserves has been fuelled by years of huge trade surpluses as the country has grown to become the world's second-largest economy.

The surpluses have caused friction with China's rivals in the West, headed by Washington, which says Beijing keeps its yuan currency artificially low in order to make its goods cheaper overseas and give exporters an unfair advantage.

But the rate of growth of China's reserves has slowed in recent years as the once-booming economy is hit by troubles in the key export markets of Europe and the United States, while the yuan has been steadily strengthening against the dollar.

Analysts attributed some of the 2013 surge to speculative capital inflows, sometimes disguised as exports or foreign direct investment.

Worst performance

"We reckon hot money inflow pressures could be still strong at the moment," Bank of America Merrill Lynch economists said in a research note, citing China's rising interest rates, the rise of the yuan and confidence in the currency's strength despite the tapering of the US stimulus.

A government report last month cited in state media suggested China's gross domestic product (GDP) grew 7.6% in 2013, down from 7.7% in 2012, which was the worst performance in 13 years.

The government is due to issue 2013 GDP growth figures on Monday.

Chinese leaders have repeatedly said they want to transform the economy to one in which domestic demand is the key growth driver, rather than public investment and exports.

But the daunting task looks set to be a long and arduous process.


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