China Currency Reserves Top Japan's, China Business News Says

March 28 (Bloomberg) -- China overtook Japan to become the world's largest holder of foreign-exchange reserves, the state- owned China Business News said, citing people it didn't identify.

The reserves stood at $853.7 billion on Feb. 28, compared $845.2 billion on Jan. 31 and Japan's $850.1 billion in reserves, the newspaper said. The figure has yet to be confirmed by the central bank, said the paper, a venture between the Shanghai government and two media groups. An official at the People's Bank of China declined to comment.

Ballooning reserves may intensify pressure from the U.S. to relax controls on the yuan, which was revalued by 2.1 percent in July and is managed against a basket of currencies. U.S. senators Charles Schumer and Lindsey Graham, who visited China last week, are considering pushing legislation that would put punitive tariffs on Chinese imports.

``The pressure is decidedly building,'' said Brad Setser, a former Treasury official and now an economist at Roubini Global Economics in New York, said in a Feb. 22 interview. ``China's rapid accumulation of reserves and the fact that it has to intervene so greatly to maintain the current value of the renminbi is significant.''

The yuan is a denomination of China's currency, the renminbi. It has climbed 1.1 percent against the dollar since the July 21 revaluation, a gain that has failed to satisfy the U.S., European Union and Japan.

The central bank official said the bank doesn't release monthly figures. Official reserves figures will be released at the end of the first quarter, the official said without giving a date. The State Administration of Foreign Exchange didn't immediately respond to enquiries from Bloomberg News.

U.S. Bond Investor

China's reserves of foreign currency, which economists say are between 70 percent and 80 percent in dollars, doubled in the two years through 2005, rising by an average $17 billion a month. That was fueled by about $120 billion of foreign investment, a cumulative trade surplus of $134 billion and billions of dollars of capital inflows betting on a rising yuan.

The country has been investing the reserves in U.S. bonds and assets. China held $262.6 billion in U.S. government Treasury bonds at the end of January, making it the