Increased shrinkage of external reserves

The dollar has been the dominant asset in China's vast foreign-exchange reserves, and fears of shrinking reserves have persisted as the dollar weakened.　　However, such concerns have suddenly intensified. The dollar fell sharply after nearly 3 weeks of narrow fluctuations in the external reserve: November 26, The dollar index, measured at trade-weighted levels, fell below 74.50 per cent, its lowest level since the beginning of August 2008, with the euro decisively breaking a 1.5050 dollar peg against the dollar and a sharp decline in the dollar against the yen, hitting a 16-month low.　　The dollar's accelerated devaluation will no doubt raise fears of a large dollar-denominated Chinese currency reserve shrinking. According to data released by the People's Bank of China, as at the end of September 2009, our foreign exchange reserves balance has reached 2.2726 trillion U.S. dollars.　　However, because the external storage structure is not disclosed, the general view of the market is that in China's foreign exchange reserves, the dollar assets accounted for about 70%, the yen is about 10%, the euro and the pound is about 20%. Zhang Ming, a researcher at the Center for International Financial Studies at the world Economic and Political Research Institute of the Chinese Academy of Social Sciences, said that China's potential capital losses on external reserves include two categories: the first is the loss of the market value of foreign exchange reserve assets, resulting in capital losses for creditors, and the second is the loss　　The loss of capital caused by exchange rate movements. Data show that 2003 years later, with the dollar effective exchange rate into a longer period of depreciation, the U.S. dollar index adjusted reserves in China began to continue to be lower than the stock before the adjustment, and the gap is increasing. By the end of September 2009, the gap had exceeded 500 billion dollars.　　That figure could be interpreted as a loss of capital to China's "foreign savings" as a result of the decline in the dollar's international purchasing power. Cass predicts loss of 3.1 trillion for this, a report by the Academy of Social Sciences has done so: it is assumed that from September 30, 2009 to September 30, 2010, the dollar depreciated by 20% for all major currencies, including the renminbi. Even without calculating the exchange gains and losses of the new foreign exchange reserves during the period, the Chinese central bank will suffer a capital loss of up to 3.1157 trillion yuan. This is equivalent to 14% of the central bank's total assets at the end of September 2009, 10.4% of China's GDP in 2008 and 141.6 times times its own capital at the end of September 2009. "The loss of foreign exchange reserves seems unavoidable, not to expect a decent return." The dollar has fallen without a doubt that the dollar has depreciated since April 2002 and resumed its decline in March 2009 after a brief pause.　　Academician Yongding, Chinese Academy of Social Sciences, said. The diversification of the foreign reserve into a general choice of the depreciation of the dollar so that many countries central banks to start a rainy day.　　There are indications that, in the context of a strong dollar that is difficult to reproduce in the short term, increasing the diversification of the assets of its foreign exchange reserves has gradually become a popular option for central banks, and the strategy of diversification has exacerbated the depreciation of the dollar to some extent. 10Earlier this month, the RBI said it had bought 200 tonnes of gold from the International Monetary Fund, raising its gold reserves by more than 50% per cent.　　This, analysts say, has actually played a role in changing the allocation of its $285 billion trillion foreign exchange reserves. November 23, the Russian central bank released data showed that the bank's gold reserves in October this year increased by 15.6 tons to 606.5 tons, an increase of 2.6%.　　Thus, the proportion of gold in Russian foreign exchange reserves has risen to 4.7%.　　In addition, Chergues Svezov, head of the Russian Central bank's open market operations department, said the Russian central bank was prepared to add Canadian dollars to the reserve currency portfolio while increasing gold holdings and seeking to reduce reliance on the dollar. In a report, CICC noted that the continued depreciation of the dollar over the past several years has left some policymakers with a loss of confidence in the dollar. Under pressure, the central banks of these countries, while reducing the dollar, have shifted their reserves to other currencies, leading to a decline in the dollar's position as the world's reserve currency. The report predicts that this trend will continue. (Securities daily)