Monday, October 26, 2009

China Foreign Exchange Reserve is $2.27 trillion: Is it too Much?

It is surely a huge amount. $2.27 trillion is the foreign exchange reserve of China at this moment. Well, I think that it is a lot and the government should invest some part of it in building infrastructure. There is no doubt that the government of China has spent a lot of money in infrastructures in the last 3 decades but do not forget that it is a very big country with a population of over 1 billion. Still, many people living in rural areas are suffering from poverty.
Reuters reported:
Earlier in the day, the dollar fell to a 14-month low after an opinion piece in a newspaper published by the People's Bank of China said it should increase the share of euro and yen in its reserves while maintaining the dollar as the principal currency.
Asked whether Beijing wanted to raise the portions of euro and yen in its portfolio, central bank vice-governor Yi Gang indicated the market might have over-reacted, at least on the day.
"The diversification of China's foreign exchange reserves in different currencies is our long-standing policy," he told Reuters.

Chinese economy is still suffering from economic recession. So, it is perhaps important for the government to help the workers who lost jobs in the last one year because of the closures of many factories.