The Vice President of the People's Bank of China, Wu Xiaoling, revealed that the Bank has diversified some of its foreign exchange reserves into Japanese yen. He made this announcement at a symposium of the People's Bank of Indonesia on November 16, in Bali, Indonesia.

Wu Xiaoling revealed that in fact, China's foreign exchange reserves have included the yen for several years.

Wang Xiaomeng, chief foreign exchange analyst at the Beijing branch of China Merchants Bank, believes it is imperative the circulation of foreign exchange reserves is increased once forex reserves pass the one trillion US dollar mark. The yen's current trading price and exchange rate in the international market are at their lowest in twenty years. Now that the Central Bank of Japan has begun to increase interest rates, the market anticipates the growth of the yen. Given this, diversifying China's forex reserves into Japanese yen is a smart move.

However, there will be no major adjustments to the structure of foreign exchange reserves. At the beginning of this month, the President of the People's Bank of China, Zhou Xiaochuan, squashed rumors in the market that the PBC was planning to sell a large portion of its US dollar foreign exchange reserves. Wang Xiaomeng said that although the market forecast for the yen is positive, compared to the US dollar, the yen's basic exchange rate is still very low.

By People's Daily Online