China to Buy Euros for Foreign Reserves

BEIJING, China (January 7) - The European Commission has received its biggest compliment after the successful launch on January 1 of the new European currency from an unexpected source. China is to switch more of its foreign currency reserves into euro to balance its reliance on the US dollar. A report in the Financial Times states that this was recommended by China's finance minister only a couple of days after twelve EU memberstates switched from their national currencies to the euro. The Big Switch which took place last week passed its most serious test on Saturday January 5, the first all out shopping day after the euro introduction. Newspaper reports indicate that already some 55% of all shopping transactions took place in euros. Despite delays at check-outs and shortages of small-denomination notes, the euro passed its first examination successfully. Europe's biggest retailer and also Europe's biggest bicycle retailer, Carrefour which operates in six European countries reported no big problems while cash payments in euros rose from 27% on Wednesday to 60% on Saturday. According to the Financial Times, China's finance minister Xiang Huaicheng also noted the successful euro introduction and stated after a meeting with Hans Eichel, the German finance minister, "China has always thought the euro important and thinks it will some day be on an equal footing with the US Dollar. I will suggest to the relevant authorities that China should not put all our eggs in one basket, and consider buying more euros as soon as possible." China's foreign currency reserves stand at US$ 208 billion (€ 232 billion) and has according to the Financial Times been distributed until the venue of the euro in about 60% US dollars, 15% yen and 15% German Marks. It is remarkable to note that the Chinese have waited until the success of the introduction of the chartal euro as the giral (bank and stock) euro has already been available since 1997.(JO)