'Reform reserve management' to prevent losses

Reform of the foreign-exchange reserve management system should be accelerated to avoid further losses from exchange-rate fluctuations, a senior official said.

The value of foreign reserves invested in US Treasury securities declined by about US$44 billion last year because of the yuan's appreciation, said Zheng Xinli, deputy head of the economic sub-committee of the National Committee of the Chinese People's Political Consultative Conference.

"The yuan-dollar exchange rate increased by 5.1 percent in 2011, while the average rate of return on the US bonds was 3 percent", meaning a loss of 2.1 percentage points, said Zheng.

China's foreign-exchange reserves climbed to US$3.2 trillion last year, with 70 percent of the total held in dollar assets, according to the central bank.

Zheng suggested reforming the reserve management system and investing two-thirds of the total reserves overseas.

"The money can be used to obtain more energy exploration and production rights in foreign countries, expand the processing trades worldwide and increase labor exports by undertaking more construction projects," he said.