China is on course to surpass Japan as the world’s largest foreign currency holder after forex reserves increased US$50 billion in the last three months of 2005 to reach US$819 billion. The central bank revealed that reserves rose US$209 billion during 2005, an improvement on 2004’s US$207 billion increase, largely due to China’s ballooning trade surplus. The bulk of these forex holdings are in US dollars, and there has been speculation that Beijing will adjust the balance and diversify into other currencies.
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