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SINGAPORE, Nov 19 (Reuters) - China is under pressure to preserve the value of its fast-growing foreign exchange reserves, China’s premier said on Monday, amid weakness in the U.S. dollar.
Its reserves, the world’s largest at $1.43 trillion, reflected the country’s growing role in global trade and its rank as the third-largest trading nation, Wen said, but he conceded that the reserves pile had raised some concerns.
“We have never been experiencing such big pressure,” Chinese Premier Wen Jiabao said in a speech to business people during a visit to Singapore.
“We are worried about how to preserve the value of our reserves,” he said, without elaborating.
China does not disclose the composition of its reserves, but analysts believe that the country has gradually reduced the proportion of its dollar holdings. Some analysts estimate that 65-70 percent of the reserves are still held in dollars.
China’s central bank governor said in South Africa on Monday that China wanted to see a strong dollar as that would support the healthy development of the global economy.
“Actually we hope to see a strong dollar. We support a strong dollar,” People’s Bank of China Governor Zhou Xiaochuan told reporters on the sidelines of a central bank governors’ meeting in Cape Town.
Wen reiterated Beijing’s line that China would make the yuan’s exchange rate more flexible over time, but he did not give a timetable.
China’s trade surplus, which hit a monthly record of $27.05 billion in October, is the source of friction with its trade partners, particular the United States, which says Chinese exporters benefit unfairly from an undervalued yuan.
“We will increase the flexibility of the renminbi (yuan) exchange rate under the principle of gradualism and gradually achieve its convertibility on the capital account,” he said.
Chinese leaders have repeatedly pledged to make the yuan more flexible and responsive to market forces, but not on a timetable forced upon them by Western countries.
The yuan CNY=CFXS has gained a further 9.2 percent since it was revalued by 2.1 percent to 8.11 per dollar on July 21, 2005, and freed from a dollar peg to float within managed bands.
China would continue to open up its economy to foreign investors, but efforts would be made to improve the “quality” of foreign investment, Wen said. (Reporting by Kevin Yao and Baizhen Chua; Editing by Alan Raybould)