China's foreign reserves balloon

China's foreign currency reserves balloons to $1.2 trillion

China's foreign reserves, already the largest in the world, surged to $1.2 trillion (£607.4bn) in the first three months of 2007, a state agency said.

The 37.4% rise over the same period last year comes despite the recent drop in the trade surplus and will add to calls for the yuan to appreciate.

The central bank has kept the currency low to encourage exports and growth.

By the middle of last year, Chinese exports overtook the US, according to the World Trade Organisation (WTO).

'Outstandingly strong'

Export growth from China rose 27% last year, and China finished just behind Germany and the US in total manufacturing exports for the full year.

WORLD'S TOP EXPORTERS Germany: $1.1 trillion US: $1.03 trillion China: $969bn Japan: $647bn France: $490bn Source: World Trade Organisation

But in its latest batch of global trade statistics for 2006, the WTO said China eclipsed the US in the last six months of the year and will almost certainly finish above the US for 2007.

At current growth rates, China is projected to overtake Germany as the world's biggest exporter by 2008.

"China's merchandise trade expansion remained outstandingly strong," the report said, noting gains in market share in exports of clothing, iron and steel.

Frustration

The WTO report is sure to stoke rising US antagonism that Beijing's trade policies are preventing American goods from entering its vast market.

The US filed two complaints against China this week over copyright policy and restrictions on the sale of American movies, music and books - the culmination of years of Washington frustration over one of the biggest sources of illegally copies goods from DVDs to sportswear.

Meanwhile, the US Treasury has been urging China to revalue its currency in order to increase the price of Chinese goods sold in overseas markets.

China is planning to invest part of its huge trade surplus in investment funds.