China contemplate using its trade surplus to build energy stocks
27 December 2006
China has indicated that it could use its $1 trillion foreign exchange reserves to strengthen its strategic energy resources.
China's constant trade surplus, backed by what foreign analysts claim to be a deliberately undervalued yuan, has resulted in its accumulation of the world's largest foreign exchange reserves.
China is keen to secure future reserves of oil, coal and other raw materials needed to feed its booming economy. Chinese vice premier Zeng Peiyan said that the country should use its large exchange reserves on speeding up the hunt for fresh oil and natural gas supplies and said that the country should establish a coal resources reserve system.
Earlier this year, Beijing hosted a summit of African leaders where it promised investments in Africa's roads and rail network in return for Africa's natural resources
In another development, China said it planned to increase efforts to allow market forces to play a bigger role in setting the market value of its currency.
A high-level US delegation, that included the US treasury secretary and Federal Reserve chief, visited Beijing earlier this month to press China for more economic currency and trade reforms. China had then promised a more flexible currency policy to help ease the trade gap with the US, which is set to reach a record $229 billion by the end of December 2006.