Third-quarter forex reserve growth fueled by falling dollar

The perennial question of what China should do with its massive forex reserves just got a bit tricker: US$141 billion trickier, to be precise. That’s how much the reserves increased in the third quarter of this year, a smaller rise than we saw in the second quarter, but hardly small change. China’s trade surplus was just US$39.27 billion in the third quarter, meaning that the increase mostly came from things other than trade, all nicely helped along by a fall in the US dollar against other currencies (though, of course, most of China’s forex holdings are still in dollar-denominated assets). Another tricky, if not yet perennial, problem is what to do about the global economic crisis. Members of the Shanghai Cooperation Organization, a group including China, Russia and central Asian states, have agreed to devise a common post-crisis strategy, as well as reaching agreements on political and trade issues. China has been resilient throughout the crisis, helped along by government policies such as the subsidies on small-engined cars that have helped to propel General Motors’ sales to record highs. The company now expects to sell 1.6 million cars in China this year through its joint ventures. As China’s economy develops and more Chinese firms go global, expect to see them turn to outsourcing to trim costs. Indian outsourcing firm Tata Consultancy Services is getting ready for the rush by quadrupling its China-based staff over the next five years.