China’s foreign exchange reserves rose by US$153 billion in the second quarter of 2011, highlighting the extent of inflationary pressures caused by a suppressed currency, the Financial Times reported. The rise follows a similar increase of US$197 billion in the first quarter of the year; total foreign reserves now stand at about US$3.19 trillion. China’s central bank uses the foreign reserves as a means to mop up foreign currency entering China, in order to keep the value of the renminbi at a pre-determined level. The effect, however, is to create inflationary pressures. Wen Jiabao said on Tuesday that controlling inflation, which hit 6.4% in June, remains a key concern, but that “we also must avoid causing big fluctuations in growth.”
Categories