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China's FX reserves may stoke inflation, a 'big burden': Premier

Published on May 11, 2014 8:26 PM

BEIJING (REUTERS) - China's war chest of foreign currency reserves has become a headache as its continued rise could stoke inflation in the long term, Premier Li Keqiang said in remarks seen on Sunday, pledging to reduce the country's trade surplus.

China's foreign exchange reserves, the world's largest, grew by US$130 billion in the first quarter, to a record US$3.95 trillion.

The central bank has pledged to keep foreign exchange reserves at reasonable levels, partly by reducing its intervention in the currency market.

"Frankly speaking, foreign exchange reserves have become a big burden for us, because such reserves translate into the base money, which could affect inflation," Phoenix New Media quoted Li as saying during a visit to Kenya.

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