CHINA: China faces rising capital inflows speculating on yuan
appreciation this year, in part the result of higher Chinese interest
rates, the director of the State Administration of Foreign Exchange said
in a statement. Yi Gang also confirmed that China’s $2.4 trillion in
foreign exchange reserves are “appropriately diversified” among
currencies including the dollar, euro and yen. He said that China’s
reserves will not used be for short-term speculation, but rather are
invested in high-quality assets. In particular, the reserves were not
invested in any of the sub-prime assets that were in part responsible
for the global financial crisis, he said. Yi said that China’s
investments were safe during the crisis, with 2008 and 2009 returns
comparable with normal years.