China's forex reserves hit record, trade surplus shrinks

China's foreign exchange reserves hit a record at the end of last year. AFP/CNA reports:

China said Tuesday its foreign exchange reserves hit a record high at the end of 2010, which is likely to fuel calls for a stronger yuan when President Hu Jintao visits Washington next week.

The increase in the forex holdings, already the world's largest, highlighted imbalances in global trade and the challenge Beijing faces in stemming a flood of liquidity into the country.

China's foreign exchange reserves expanded 18.7 percent from a year earlier to US$2.847 trillion at the end of December, the central bank said in a statement, amid strong demand for Chinese exports.

A report on Monday had shown that China's trade surplus shrank in December. From Bloomberg:

China reported a less-than-forecast $13.1 billion trade surplus for December, bolstering the nation’s bargaining position ahead of a Jan. 19 meeting where U.S. President Barack Obama may press for more gains in the yuan.

The gap compared with the $20.8 billion median estimate of 20 economists surveyed by Bloomberg News and November’s $22.9 billion. Exports rose 17.9 percent to $154.2 billion from a year earlier and imports climbed 25.6 percent to $141.1 billion, the customs bureau said on its website today...

The surplus was the smallest since April. The increase in exports was less than economists’ 23.3 percent median estimate and compares with a 35 percent gain in November.

Import growth compared with a forecast of 24.9 percent and the 38 percent increase in the previous month. A higher comparative base a year earlier may have pared gains in both imports and exports.