Given this vulnerability to emerging imbalances, the buildup of ever-larger holdings of bonds resulting from sterilization of foreign exchange purchases poses threats to China’s financial stability. Hence, the sooner the Chinese, in their own self-interest, move to a more flexible currency regime, perhaps leading other Asian currencies to become more flexible as well, the better for all participants in the global trading system.
External trade has recovered. From January to September, exports grew by 18 percent, while imports grew by 30.3 percent. Meanwhile, foreign direct investments jumped almost 40 percent in the first eight months of the year with the bulk coming from manufacturing and financial services. Our external payments position remains strong. As of October, the gross international reserves stood at $ billion.