DOLLARS OR YUAN WHAT MATTERS FOR CHINESE ECONOMY

The U.S. dollar's depreciation is "negative" for the Chinese economy, according to China's top currency regulator. China will manage its foreign-exchange reserves "according to set guidelines," Hu Xiaolian told reporters Saturday in Beijing, where she is attending the annual meeting of the National People's Congress. "To the extent that dollar depreciation is negative for the global economy, the Chinese economy will definitely be affected."

"It's the frying pan or the fire for China," said Stephen Green, senior economist at Standard Chartered Bank Plc in Shanghai. "If they stop buying U.S. dollars or diversify, this will only do further damage to their existing holdings."

China, the second-largest foreign holder of U.S. Treasuries, said the declining dollar is a bigger concern for the Chinese economy than the yuan's gains, Chinese commerce minister Chen Deming said in December.

The dollar's depreciation makes major commodities such as gold and oil more expensive, and reduces the wealth of countries and companies that hold dollar assets, Chen said at the time.

China's economy, the world's fourth-largest, may grow 10 percent this year, according to the International Monetary Fund, down from 11.4 percent in 2007.


ARTICLE FROM CHINAPOST.COM