Taiwan's forex reserves hit record high of US$202.8 B. as of Nov.

Taipei, Dec. 8, 2003 (CENS)--Taiwan's foreign exchange reserves hit a new high of US$202.83 billion as of the end of November, up US$6.2 billion from a month earlier, according to the Central Bank of China (CBC) in Taiwan.

If compared to last year, the figure posted a whopping increase of US$41.1 billion, and was almost double the corresponding amount of four years ago, making Taiwan the third largest forex keeper in the world, next only to Japan and mainland China.

Chou A-ting, director general of CBC's Foreign Exchange Department, indicated that the increase in November forex reserves was mainly caused by a net flow US$23.5 billion in foreign equity funds, comprising overseas exchangeable corporate bonds and depository receipts, and forward forex of US$17 billion sold by manufacturers. In addition, the profits from the operations of forex reserves and the appreciation of CBC-holding euros and Japanese yens also contributed to the rise of forex reserves.

However, the rapid growth of forex reserves has recently become a target of criticism by opposition parties and scholars. They complained that the government did not well control or make good use of the forex reserves, and the soaring forex reserves might cause the appreciation of the New Taiwan dollar, which would be detrimental to export-oriented manufacturers.

The main reason for the sharp rise of forex reserves in the past year was the massive inflow of short-term foreign capital, but such capital would be withdrawn from Taiwan at any time, Chou explained. Besides, he further pointed out that the forward forex sold by manufacturers would result in a decline of forex supply in the future. So, Chou emphasized that Taiwan's long-term stable forex reserves should be around US$116.6 billion.