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Friday, 2nd June 2006 (9633 views)

China has been urged to use some of its foreign exchange reserves to buy gold and oil.

Analysts are urging the government to protect itself against possible further declines in the value of the US dollar.

China currently holds the largest stock of foreign exchange in the world, much of which is in US Treasuries.

Speaking to the Shanghai Daily, advisor to the People's Bank Yu Yongding said potential increases in the value of gold and oil meant China should be hedging its bets.

The dollar has been in decline in recent months, but picked up slightly this week as gold prices fell.

Commentators expect further short-term declines in the price of gold with some suggesting that it could fall as low as $600 per ounce.

The longer-term projection however is quite different.

Record investment in China has generated massive foreign exchange reserves.

China's recent industrial boom has established it as the world's fastest growing economy.

 

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