China’s Foreign Exchange Reserves Fall in 2008

Looks like the worldwide recession is starting to effect China’s Forex Reserves as well.  It was reported this weekend that China’s foreign exchange reserves have declined for the first time since 2003 after reaching $1.9 trillion at the end of September 2008.  China’s amount of reserves has been rising by hundreds of percent annually and this recent decline may indicate further slipping of the vast amount of reserves the country had amassed.

This chart displays how the Yuan has been gaining on the US Dollar for months and in recent weeks has levelled out.  The recent dollar strength can be seen not only against the Yuan, but many other currencies.

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One party official attributed the decline in forex reserves to the slowdown in appreciation of the Yuan against many currencies and the short-term depreciation of the Yuan against the USD.  It is also due to the increase of foriegn investment by Chinese companies leaving less money in the hands of investors.

1. http://www.chinadaily.com.cn/china/2008-12/24/content_7335345.htm [↩]