16 Jul 2009

China's foreign reserves top $US2 trillion

7:30 am on 16 July 2009

China's foreign exchange reserves, the world's largest, now surpass $US2 trillion.

The People's Bank of China says currency reserves rose 17.8% from June 2008 to a record $US2.13 trillion. Its currency stockpile is twice the size of Japan's - the second-biggest holder.

The BBC reports the bulk of China's foreign currency reserves are in dollars - mainly US government debt.

The reserves rose as foreign investment flowed back into China. The main stock index, the Shanghai Composite Index, has jumped by 74% this year.

China's leaders have expressed concern about the stability of the US dollar and have called for the creation of a new international reserve currency.

They fear the dollar could weaken as the financial crisis takes its toll and undermine the value of China's vast holdings of US government debt.

The People's Bank of China buys many of the dollars entering China to prevent its exchange rate from increasing.