China has been snapping up euros to put in its foreign exchange
reserves ahead of the single currency's debut in January.
Central bankers said the prospective strength of the euro made
sizeable reserves vital and China will increase its holdings next
year.
Guo Shuqing, vice-governor of the People's Bank of China, said the
country is not worried by fluctuations and slides in the currency's
value, calling the exchange rate "inherently stable."
"We believe that in the medium and long term, the euro, backed by
the European Union's (EU) economic strength, will be a fairly
stable currency," he said.
"Stocks of the euro have been growing in our foreign reserves,"
Guo, also director of the State Administration of Foreign Exchange
(SAFE), told a luncheon sponsored by the European Union Chamber of
Commerce in China yesterday. "During the past two months we have
bought a lot of euros. In the coming months, we'll buy more."
Underpinning China's support of the euro was the currency's role in
the international currency system, the width and depth of European
capital markets and the inherent stability of the exchange rate of
the single currency.
China's foreign reserves stood at US$203 billion at the end of
October, he said.
On
January 1, euro banknotes and coins will be introduced, marking the
conclusion of the changeover to the euro that started almost three
years ago.
The euro's role as an international financing and investment
currency has already increased substantially since it was
introduced in money and financial markets of the 12 member
countries on January 1, 1999, said Christian Noyer, vice-president
of the European Central Bank (ECB).
But Noyer said the ECB takes a neutral stance in the
internationalization of the euro, which ends the national
currencies of member countries and their economic implications.
"This means it neither pursues the internationalization of the euro
as an independent policy goal, nor does it attempt to hamper its
use by non-residents," he said.
Guo said China's trade surplus is likely to shrink in the early
years following its entry into the World Trade Organization, as
growth in imports is expected to outpace that in exports. However
he said the outlook for international balance of payments is
optimistic, and the exchange rate of the renminbi will remain
"basically stable," as China becomes more attractive to foreign
capital.
(China
Daily November 21, 2001)