2012 NPC & CPPCC Sessions

Economist on Foreign Exchange Reserves and Finance

( 2011-March-7 14:25:41)


Economist on Foreign Exchange Reserves and Finance

By staff reporter Hou Ruili

Dr. Liu Kegu is a consultant to China Development Bank and deputy chair of the Academic Committee of China Center for International Economic Exchanges (CCIEE). He was formerly the deputy director-general of the Fiscal and Taxation Restructuring Department of the Ministry of Finance, and masterminded China's reforms to its financial system17 years ago. He was later appointed vice governor of Liaoning Province, where he participated in designing reforms to the local social security system. Dr. Liu, as a member of the National Committee of the CPPCC, has interesting views on the debate about China's foreign exchange reserves.

According to Dr. Liu, the former governor of China's central bank Dai Xianglong addressed a CCIEE meeting earlier this year and commented that the depreciation of the US dollar by 40 percent from 2002 to 2010, posed grim risks to China's foreign exchange reserves which is dominated by the American currency.

By the end of 2010 China's foreign exchange reserves had reached US $2.85 trillion, up US $450 billion from the previous year. China's surplus of international trade is partly being spent on buying foreign bonds and securities, which, Dr. Liu says "benefits the governments and people of these countries."

To head off risks to China's huge holding of foreign currencies, Dr. Liu suggested the share of gold should be increased and that virtual assets, including government bonds and securities of varied kinds, be converted into tangible assets such as oil/gas fields, mines and real estate. These measures would see China taking the initiative in international cooperation on resources, warding off deflation of its foreign exchange reserves and alleviating inflationary pressure.

Dr. Liu also called for relevant authorities to open more channels to use foreign exchange, since foreign exchange supply is now a "bottleneck" issue for Chinese companies intent on going global.

Liu also advocates grassroots finance, citing the difficulties small enterprises and farmers have difficulties in raising capital. He said that some sectors exhibit financial excess while others are plagued by deficiency. "The financial system should hand out loans not only to government organs and large and medium-sized enterprises, but also to the millions of small and mini-enterprises, the tens of millions of self-employed, and 200 million farming households and their production organizations. This is the obligation of China's financial system in the 12th Five-year Plan period." Liu concluded.

Top Stories

International Commentary

Copyright © China Today. All Rights Reserved E-mail: chinatodaynewmedia@hotmail.com Tel: 86-010-68996342.