BEIJING (AFP) — China said Tuesday its foreign exchange reserves, already the world's largest, topped 1.9 trillion dollars in September but the growth rate continued to slow amid global economic weakness.
The September-end figure was up 32.9 percent from a year earlier and about 25 percent higher than at the end of 2007, according to data posted on the People's Bank of China's website.
However, the year-on-year growth showed a continued easing from the nearly 40 percent increase recorded in the first quarter of this year.
Experts said growth in the reserves looked set to slow further amid the global economic woes, government steps to curb speculative "hot" money inflows, and the strengthening US dollar.
"We think the (reserve growth) slowdown is related to the dollar's recent strengthening," said Li Heng, a Beijing-based economist with TX Investment Consulting.
The strengthening of the US dollar -- seen as a safe bet amid world financial chaos -- has likely discouraged "hot" money flows by limiting the potential for further profits from the yuan's rise, he said.
Official Chinese concern has been rising over a surge in the "hot" money inflows, as speculators have bet on China's yuan currency continuing to rise by illegally pouring money into the country's economy.
"As the expectation for the yuan to further appreciate against the dollar weakens, the forex reserves growth is set to slow down," Li said.
"Hot money" has emerged as a third major factor in the spectacular rise of China's forex reserves, alongside the two traditional sources of reserve growth -- the trade surplus and incoming foreign direct investment.
The September forex reserves figure was up 21.4 billion dollars for the month, the central bank said.
The reserves data came out a day after China said its trade surplus hit a monthly all-time high of 29.3 billion dollars in September despite the world financial crisis.
However, experts said the widening surplus was largely because of slowing import growth due to softening international raw materials prices.
Li said the various factors at play could actually be causing some capital outflows as troubled foreign firms and investors may need the money overseas.
But he does not expect a wholesale outflow.
"We believe forex reserves growth will stabilise in future. So far significant growth in capital outflows is not happening," he said.
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