China will increase monitoring of money inflows and banks' foreign currency holdings following a surge in the current account surplus in 2007.
A trade surplus will continue to affect the balance of payments in 2008, but restructuring is starting to take off and will continue, the State Administration of Foreign Exchange (SAFE) said in a report released on Thursday.
The current account surplus, the broadest measure of trade and investment inflows, widened 47 percent year-on-year to 371.8 billion U.S.dollars in 2007, the currency regulator said.
The capital and financial account, a measure of investment inflows, showed a surplus of 73.5 billion U.S. dollars, compared with 6.7 billion U.S. dollars in 2006.
The regulator vowed to keep a close eye on foreign capital inflows as the rising yuan is set to fuel speculation. Oversight of banks' foreign currency borrowing and lending should also be strengthened, it said.
China has stepped up efforts to trim its trade surplus, which is believed to contribute to the 11-year high inflation rate. The consumer price index was up 8.5 percent in April from a year earlier, nearly equal to February's 8.7-percent rise, which was the most since May 1996.
The central bank has raised the reserve ratio to a record 16.5 percent of deposits and allowed the yuan to gain more than 5 percent this year against the U.S. dollar to tame inflation.
The rising yuan helps curb the trade surplus by lowering import costs and making exports more expensive and less attractive.
(Xinhua News Agency June 6, 2008)
