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China's foreign reserves top $2tn China's foreign reserves top $2tn
(about 2 hours later)
China's foreign exchange reserves, the world's largest, have surpassed $2 trillion (£1.2tn), the country's central bank has said.China's foreign exchange reserves, the world's largest, have surpassed $2 trillion (£1.2tn), the country's central bank has said.
Currency reserves rose 17.8% from June 2008 to a record $2.13tn. Its currency stockpile is twice the size of Japan's - the second-biggest holder.Currency reserves rose 17.8% from June 2008 to a record $2.13tn. Its currency stockpile is twice the size of Japan's - the second-biggest holder.
The reserves rose as foreign investment flowed back into ChinaThe reserves rose as foreign investment flowed back into China
The People's Bank of China buys many of the dollars entering China to prevent its exchange rate from increasing.The People's Bank of China buys many of the dollars entering China to prevent its exchange rate from increasing.
BBC business editor Robert Peston says that the primary cause of China's ballooning foreign currency reserves on this occasion is not the surplus of China's exports over its imports.BBC business editor Robert Peston says that the primary cause of China's ballooning foreign currency reserves on this occasion is not the surplus of China's exports over its imports.
CURRENCY RESERVES Foreign currency held by a government or a central bankUsed to pay foreign debt obligations or influence exchange ratesThe dollar is viewed as the world's reserve currency as the vast majority of reserves are held in the US currencySmaller amounts are held in euros, pounds and yen Robert Peston's blog Dollar poses dilemma for ChinaCURRENCY RESERVES Foreign currency held by a government or a central bankUsed to pay foreign debt obligations or influence exchange ratesThe dollar is viewed as the world's reserve currency as the vast majority of reserves are held in the US currencySmaller amounts are held in euros, pounds and yen Robert Peston's blog Dollar poses dilemma for China
He says it is the result of overseas investors identifying China as the strongest of the world's major economies and pouring money into property and shares.He says it is the result of overseas investors identifying China as the strongest of the world's major economies and pouring money into property and shares.
China's main stock index, the Shanghai Composite Index, has jumped by 74% this year.China's main stock index, the Shanghai Composite Index, has jumped by 74% this year.
Dollar dominanceDollar dominance
The bulk of China's foreign currency reserves are in dollars - mainly US government debt.The bulk of China's foreign currency reserves are in dollars - mainly US government debt.
The country's leaders have expressed concern about the stability of the US dollar and have called for the creation of a new international reserve currency.The country's leaders have expressed concern about the stability of the US dollar and have called for the creation of a new international reserve currency.
They fear the dollar could weaken as the financial crisis takes its toll and undermine the value of China's vast holdings of US government debt.They fear the dollar could weaken as the financial crisis takes its toll and undermine the value of China's vast holdings of US government debt.
Economy recovers?
There are signs that China's economy is recovering from its recent slowdown as a massive government stimulus package takes effect.
Property prices, investment, bank lending and retail sales have all picked up.
But some economists fear that the budding recovery could trigger new bubbles in bank lending and real estate.
China is due to release economic growth data for the second quarter on Thursday.