China's foreign exchange reserves rose in the fourth quarter of 2010 by a record $199 billion, an additional indication of the country's worsening inflation problems.
China's reserves, which are the largest in the world, increased by 18.7% in 2010, including an increase of $194 billion in the third quarter.
The reserve increase further adds to inflationary pressures exacerbated by China's recent monetary policy, which includes strong bank lending and a rising supply of renminbi (RMB). The country's central bank, the People's Bank of China, has been rapidly printing the Chinese currency to buy up foreign currencies, such as the dollar and euro, due to trade surpluses and foreign investment.
Eswar Prasad, former head of the IMF's China division, told the Financial Times, ""China's continued strong bank lending and massive reserve accumulation could be bellwethers of trouble to come. They throw cold water on the notion that macroeconomic policies have the economy under control and have struck the right balance in keeping growth high while preventing overheating.""
The issue of additional RMB may also be an impetus for American officials to increase pressure on China to increase the valuation of its currency.
According to Bloomberg Businessweek, President of Brazil, Dilma Rousseff, will make China's trade and currency policies a "priority" during her visit to China in April.
Currency and trade issues will most likely also be featured strongly when Chinese President Hu Jintao makes a state visit to the U.S. next week.
China's reserves, which are the largest in the world, increased by 18.7% in 2010, including an increase of $194 billion in the third quarter.
The reserve increase further adds to inflationary pressures exacerbated by China's recent monetary policy, which includes strong bank lending and a rising supply of renminbi (RMB). The country's central bank, the People's Bank of China, has been rapidly printing the Chinese currency to buy up foreign currencies, such as the dollar and euro, due to trade surpluses and foreign investment.
Eswar Prasad, former head of the IMF's China division, told the Financial Times, ""China's continued strong bank lending and massive reserve accumulation could be bellwethers of trouble to come. They throw cold water on the notion that macroeconomic policies have the economy under control and have struck the right balance in keeping growth high while preventing overheating.""
The issue of additional RMB may also be an impetus for American officials to increase pressure on China to increase the valuation of its currency.
According to Bloomberg Businessweek, President of Brazil, Dilma Rousseff, will make China's trade and currency policies a "priority" during her visit to China in April.
Currency and trade issues will most likely also be featured strongly when Chinese President Hu Jintao makes a state visit to the U.S. next week.
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