What China can do for the world is not to sell out its massive dollar
reserve, but slightly increase its hold of the currency to give reasonable
support to the US effort to save its economy, said a senior economist here
yesterday.
It is indeed difficult for China to handle its huge forex reserve, as the
U.S. currency has already depreciated 20 percent against the Chinese yuan, said
Cheng Siwei, well-known economist at a financial forum held in Guangdong.
"China would suffer from losses if it sells off the dollar, so our strategy
should be not to sell, but to slightly increase dollar reserve," said Cheng,
also former vice-chairman of the Standing Committee of the National People's
Congress (NPC).
Cheng made the remarks amid increasing concern that China might use its forex
reserve to finance its 4-trillion-yuan stimulus plan. China held 1.9 trillion
dollars worth of forex reserve by September this year.
China "can only afford to do what is corresponding to its level of
development and national power amid a global crisis," said Cheng.
"We should be prudent as to how to deal with our forex reserve," said Cheng,
noting that China, despite its large size of economy, has its gross domestic
product (GDP) accounting for only 6 percent of the world's total, and its per
capita GDP ranking falling out of the top one hundred list.
