China was preparing to boost the amount of euros in its forex reserves to diversify its holdings against the greenback, a leading financial official said in state press reports yesterday.
"It's better to put all our eggs in varied baskets rather than a single one," Foreign Minister Xiang Huaicheng was quoted by the Shanghai Daily as saying.
"I might suggest to my colleagues in other government departments to buy more euros," Xiang said at a joint press conference Sunday with German Finance Minister Hans Eichel.
"Obviously the euro is getting stronger these days ... no one will doubt the success of the euro."
China's US$208 billion in foreign currency reserves was the world's second largest after Japan, and was largely tied up in US treasury bonds, the paper said.
Mimicking other Chinese officials, Xiang refrained from saying what percentage of forex reserves would be denominated in euros, or how many euros China was currently holding.
China's forex reserves increased by 7.0 percent in 2000 after a 6.7-percent rise in 1999, according to central bank figures. In the first 10 months of 2001, China's reserves leapt by more than 20 percent since the end of 2000.
The euro, which was introduced at the start of 1999, replaced the individual currencies of 12 EU member states on Jan. 1.
Chen Xingdong, chief economist with BNP Paribas Peregrine Securities in Beijing, said the make up of China's foreign reserves were a state secret, but greenback holdings could have dropped from 70 percent to 80 percent in 1998 and 1999 to as low as 50 percent now.
"The euro provides China with very good leverage to maintain its foreign exchange reserves investment," Chen said.
"China has also the yen, but it recently has been significantly reduced, and also the British pound, before the euro, they also held Deutsche marks."
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