China’s foreign exchange reserves may have reached a record US$2.5 trillion, Bloomberg reported. While official figures are still pending, many economists and traders anticipate the figure will surge. A weaker dollar, especially against the euro, could be one reason for the increase in reserves by increasing the dollar value of assets held in other currencies. The country’s trade surplus and cash inflows from foreign direct investment also contributed to the rise. If the official figure is above US$2.5 trillion, the surge may lead to further pressure on China to allow its currency to appreciate, especially against the US dollar. People’s Bank of China Governor Zhou Xiaochuan has indicated that the currency may appreciate over the medium term, although Premier Wen Jiabao warned that a rapid rise in the value of the renminbi would bring disaster to China and the world.
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