China foreign exchange reserves at $1.954 trillion

By The Associated Press

BEIJING - China's central bank says its foreign exchange reserves rose 16 per cent year-on-year to US$1.954 trillion by the end of March.

In a notice on its website Saturday the bank said reserves increased by $7.7 billion in the first quarter, $146.2 billion lower than the same period last year.

Analysts believe China holds up to 70 per cent of its foreign reserves in U.S. dollar-denominated assets, including Treasury securities.

In March, the reserves increased by $41.7 billion, an increase $6.7 billion more than the same period last year.

China's reserves have ballooned as the central bank buys up dollars generated from its huge trade and influx of foreign investment.

While China's economy has slowed due to a plunge in trade and a slump in the domestic real estate industry, recent data show the drop eased in March.

Beijing has taken steps to hold down the price of exports by cutting taxes on exporters and stopping the rise of China's tightly controlled currency, the yuan, against the U.S. dollar. Economists say both steps could strain relations with trading partners if China is seen to be competing unfairly.

Western leaders, including British Prime Minister Gordon Brown, are pressing for China to contribute to a global bailout fund from its reserves.

Exports fell 17 per cent in March from a year earlier, the fifth straight monthly decline but less severe than February's 25.7-per-cent plunge, the sharpest in a decade, the customs agency reported Friday.

It said trade "showed clear signs of improvement."

Imports fell by 25.7 per cent, widening the Chinese trade surplus to $18.6 billion from February's $4.8 billion gap.