China forex reserves hit $3.31 trn in December

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China's foreign exchange reserves, already the world's largest, rose to $3.31 trillion at the end of last year to the highest level since February, central bank data showed on Thursday.

The figure was up from the $3.29 trillion seen at the end of September, according to data from the People's Bank of China, and was unveiled on the same day Beijing said the country's trade surplus for 2012 hit a four-year high.

Growth in China's massive reserves has been fuelled by decades of large trade surpluses as the country has grown to be the world's second-largest economy.

The huge surpluses have caused friction with China's rivals in the West, headed by Washington, saying Beijing keeps its yuan currency artificially low in order to make its goods cheaper overseas, and giving exporters an unfair advantage.

However, the rate of growth has slowed in recent quarters as the once-booming economy has been hit by crisis in the key export markets of Europe and the United States, while more cash has steadily began seeping abroad.

Economic growth hit a more than three-year low of 7.4 percent in the third quarter, although recent manufacturing and other data have fuelled optimism that it has begun to recover.

"With clear signs of economic recovery ... we expect the direction of capital flows is changing to some moderate capital inflows to China recently," Lu Ting, Hong Kong-based economist at Bank of America Merrill Lynch, said in a report.

Separately, Chinese banks cut back lending in December from November, separate data from the central bank showed.

Domestic banks extended 454.3 billion yuan ($73.0 billion) in new loans in December, down from 522.9 billion yuan in November, the central bank said.

The figure was below market expectations of 550 billion yuan, according to an average forecast of 15 economists surveyed by Dow Jones Newswires.

For the whole of last year, Chinese banks granted 8.20 trillion yuan in new loans, up 732.0 billion yuan from a year earlier, the central bank said, as Beijing has encouraged banks to lend more in a bid to boost growth.

Sun Junwei, Beijing-based economist at British bank HSBC, noted growth in other major sources of financing, including bonds and off-balance-sheet lending.

Total social financing, a broader measurement of credit in the real economy, reached 1.63 trillion yuan in December, higher than the 1.14 trillion yuan in November, the central bank said.

"The eye-catching performance of total social financing showed current credit and liquidity conditions are relatively loose and good for the recovery in the domestic economy," Sun told AFP.

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