China reports rare decline in foreign reserves

China's foreign reserves, world's biggest, show rare decline but still at $3.2 trillion

Associated Press 

BEIJING (AP) -- China's foreign reserves showed a rare decline in the final quarter of 2011 but still were by far the world's biggest at nearly $3.2 trillion.

The reserves were $3.181 trillion as of Dec. 31, down about $20.6 billion from the end of the previous quarter in September, the central bank reported Friday.

The reserves are a side effect of exchange rate controls that require Beijing to buy most of the foreign currency that comes into China. But the country's trade surplus has narrowed in recent months and some investors have been taking money out of the country, reducing total purchases for the reserves.

Foreign critics complain the controls keep China's yuan undervalued, giving its exporters an unfair price advantage and hurting foreign competitors at a time when global governments are struggling to create new jobs.

The yuan has been allowed to gain gradually against the U.S. dollar in tightly controlled trading. But some American lawmakers are calling for punitive tariffs on Chinese goods unless Beijing acts faster.

China occasionally reports a decline in its reserves for a single month but a decline for a full quarter is rare.

The reserves declined steadily over the course of the quarter, falling from $3.274 trillion at the end of October to $3.221 trillion at the end of November.

Still, based on gains in previous quarters, the reserves rose by 11.6 percent for the year, up from $2.85 trillion at the end of 2010.

China's global trade surplus last year narrowed by 34 percent from the 2010 level to $155.2 billion as export demand weakened due to U.S. and European economic problems.