China denied of pursuing a policy of having higher forex reserves. The People’s Bank of China‘s Vice Governor Wu Xiaoling said that the excessive trade surplus, which is the major source of the country’s high reserves, needs to be addressed. Xiaoling said that although trade deficit is not desirable, excess of trade surplus is also not good. Xiaoling also said that the government is exploring the possibility of increasing access for individuals and corporations to the foreign exchange trade and thereby reduce the government’s dominance. Some of these measures include doing away with control over enterprises in opening foreign exchange accounts, increasing the limit for individuals to purchase foreign exchange under the current account, and loosening restrictions on enterprises to make investments overseas and their use of foreign exchange under the capital account. China’s forex reserves stood at US$853.6 billion as at end February 2006.
