Europe urges China to maintain status quo on forex reserves
Friday, 14 December 2007
PARIS, Dec 13 (AFP): The EU's top financial affairs official said yesterday that Europe had asked China to refrain from changing its policy on its massive foreign reserves in order to avoid instability on currency markets.
"We have said to the Chinese: this isn't the moment to be taking decisions about this," said European Union Monetary Affairs Commissioner Joaquin Almunia, referring to a possible change in Chinese foreign reserve policy.
Chinese foreign currency reserves, the biggest in the world at some 1.45 trillion dollars, are thought to be held about 70 per cent in the US currency and Chinese officials have suggested recently that they may move away from the US unit and use the euro more.
The rapidly falling dollar has reduced the value of the Chinese reserves but a move into the euro would weaken the US currency still further and would strengthen the rising euro.
The strong euro, which is at historic highs against the US currency near 1.50 dollars, has raised fears in Europe that European exporters will be hit by a loss in competitiveness.
"We have said to the Chinese: this isn't the moment to be taking decisions about this," said European Union Monetary Affairs Commissioner Joaquin Almunia, referring to a possible change in Chinese foreign reserve policy.
Chinese foreign currency reserves, the biggest in the world at some 1.45 trillion dollars, are thought to be held about 70 per cent in the US currency and Chinese officials have suggested recently that they may move away from the US unit and use the euro more.
The rapidly falling dollar has reduced the value of the Chinese reserves but a move into the euro would weaken the US currency still further and would strengthen the rising euro.
The strong euro, which is at historic highs against the US currency near 1.50 dollars, has raised fears in Europe that European exporters will be hit by a loss in competitiveness.