BEIJING, June 12 China's rapid accumulation of
foreign-currency reserves poses difficulties for steering
economic policy, officials with the nation's foreign exchange
regulator said on Thursday.
China will keep its foreign exchange reserves at a
reasonable level, officials of the State Administration of
Foreign Exchange (SAFE) said in a webcast.
China's foreign exchange reserves, the world's largest, grew
by $130 billion in the first quarter, to a record $3.95
Large foreign currency purchases by China's central bank,
which regularly intervenes to cap rises in the yuan, amount to
creation of base money and can fuel inflation unless the central
bank soaks up the excess yuan injected into the system.
(Reporting by China economics team; Editing by Richard Borsuk)