From Bloomberg Businessweek:

China's foreign-exchange reserves posted the first quarterly decline in more than a decade, as foreign investment moderated, the trade surplus narrowed, and investors withdrew capital amid the global financial crisis.

The holdings, the world's biggest, fell to $3.18 trillion at the end of December from $3.2 trillion at the end of September, according to People's Bank of China data released in Beijing today. That was the first quarterly contraction since the second quarter of 1998, according to data compiled by Bloomberg.

Slower growth in foreign-exchange reserves may provide Premier Wen Jiabao with ammunition to defuse overseas criticism of the nation's currency policy and may add pressure on the central bank to lower lenders' reserve requirement ratio to boost liquidity. The global downturn may lead to capital withdrawal "of a large magnitude" this year, central bank governor Zhou Xiaochuan said in an interview with the Xinhua News Agency, published Jan. 8.

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