China’s foreign exchange reserves rose a record amount in the third quarter thanks to capital inflows and a persistently large trade surplus that adds weight to complaints Beijing is intentionally undervaluing its currency.
The reserves, already by far the largest in the world, increased by $194bn in the past three months to $2,650bn, eclipsing the previous record rise of $178bn in the second quarter of 2009.
The recent strengthening of the euro and yen against the US dollar explains some of the rise because China’s reserves are expressed in dollars but invested in a range of currencies and assets. But the record build-up also provides evidence of an undervalued renminbi and will bolster the case of trade partners calling for faster appreciation in the currency.