China spends 195 billion dollars to maintain currency peg

AFP, March, 2005

BEIJING (AFP) — China's central bank spent 1.61 trillion yuan (195 billion dollars) buying foreign currency last year to maintain the yuan's peg with the dollar, a rise of 40 percent over 2003.

The People's Bank of China also drained 669 billion yuan from the banking system via open market operations last year, more than double the 282 billion yuan used in 2003, Xinhua news agency said citing a central bank report.

"The central bank faces comparatively large pressure in the management of money flow and currency control," it said.

China keeps its currency pegged to the US unit in a very narrow trading bank of about 8.28 yuan, a level which trading partners, especially the United States, say gives Chinese exports an unfair advantage.

The government is...