BEIJING: China said Tuesday its foreign exchange reserves hit a record high at the end of 2010, which is likely to fuel calls for a stronger yuan when President Hu Jintao visits Washington next week. The increase in the forex holdings, already the world's largest, highlighted imbalances in global trade and the challenge Beijing faces in stemming a flood of liquidity into the country. China's foreign exchange reserves expanded 18.7 percent from a year earlier to $2.847 trillion at the end of December, the central bank said in a statement, amid strong demand for Chinese exports. Analysts blame China's huge trade surplus - $183.1 billion in 2010 - and its massive stimulus measures to combat the financial crisis for the flood of credit that has been fuelling inflation and property prices. Foreign exchange earned by Chinese exporters is changed for yuan with the central bank so it can control the value of the currency. The foreign exchange is added to China's growing coffers, while the yuan flow into the economy. China's trade partners led by the United States say its tight grip on the yuan has led to a gross undervaluation of the local unit, giving exporters an unfair trade advantage. However the foreign currency stash gives China more leeway to make good on its pledge to buy bonds from struggling European countries. – Agence France
