China’s foreign-exchange reserves climbed by a record last quarter and lending exceeded the government’s annual target, increasing pressure on the central bank to tighten policies to rein in liquidity and inflation.
The currency holdings, reported by the central bank on its website today, rose by $199 billion to $2.85 trillion, the biggest quarterly gain since Bloomberg data began in 1996. Full- year yuan-denominated lending of 7.95 trillion yuan ($1.2 trillion) compared with a target of 7.5 trillion yuan.
The central bank may need to raise benchmark interest rates, boost reserve requirements for lenders and allow faster yuan appreciation, economists from Standard Chartered Plc and Credit Agricole CIB said. Policy makers may also experiment with more ways of encouraging outflows of capital, after expanding a program for exporters to park revenue overseas and letting some citizens invest directly abroad.
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