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China’s forex reserves hit US$2,000B or 2T mark

China’s foreign exchange reserves surged through the US$2,000B mark at the end of June after a sharp accumulation of funds in Q-2, as money poured into the country to take advantage of faster economic growth and a possible future revaluation of the Chinese currency. The People’s Bank of China, the central bank, announced Today that foreign exchange reserves reached US$2,132B after rising by US$177.9B in April to June, including a record monthly build-up of US$80.6B in May. China has the world’s largest foreign currency holding, and much of it remains in US dollar assets despite Beijing’s recent criticism of the dominant role of the dollar as a global reserve currency. The latest figures represent an abrupt reversal of an emerging trend of the previous two quarters. Foreign reserves increased by just US$7.7B in the Y 2009 Q-1  and recorded a gain of US$40.4B in Q-4 Y 2008, as foreign companies sent profits home and banks demanded repayment of loans. The Q-2  growth in foreign currency reserves far outstripped China’s trade surplus and foreign direct investment for the same period, indicating the accumulation of foreign currency inside the country was being driven by other factors. An economist at a Chinese state think-tank, who asked not be named, said speculation was growing that the renminbi would appreciate again. China maintained a virtual US$ peg for more than a decade until 2005, before eventually shifting to a new, more flexible policy under pressure from the US and other trading partners