China Should Increase Diversification of Reserves – Christina Soon

From Bloomberg:

China should increasingly diversify its foreign-exchange reserves to reduce the risk of losses from declines in the dollar, the country’s National Bureau of Statistics said.

It should also encourage Chinese companies to invest abroad to curb expectations of a stronger yuan, the bureau today said in a statement on its Web site. U.S. dollars probably account for 70 percent to 80 percent of China’s foreign reserves, said Tai Hui, an economist at Standard Chartered Bank in Hong Kong.

“The U.S. dollar may continue to weaken, increasing the risks of foreign-exchange losses in our currency reserves,” the statement said. Speculation that the dollar will fall “also boosts expectations that the yuan will strengthen.” The bureau didn’t provide reasons why it expects the dollar to fall. [Full Text]

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