China's foreign exchange reserves hit a record $2.13 trillion at the end of June but also raised concerns about the influx of speculative capital hurting the world's third largest economy.
China added $185.6 billion to its kitty in the first half of the year, nearly $95 billion down on the same period a year ago.
The reserves growth picked up speed in the second quarter, with $178 billion added, ending the decline in the first two months when monthly exports tumbled to near a decade low, the apex bank, People's Bank of China said on Wednesday.
China's huge stockpiles, which expanded by 17.84 per cent in the first half year on year, are more than double those of Japan, the second largest holding $1.02 trillion.
"The rapid growth in the second quarter was not only led by the still rising trade surplus, but also the confidence of overseas investors as they cash-in to buy Chinese assets," Zhuang Jian, senior economist with the Asian Development Bank, said.
Customs figures showed Chinese foreign trade shrank 23.5 per cent to $946.12 billion in the first half of the year, as the global financial crisis sapped demand for Chinese goods. However, China still retained a trade surplus of $96.94 billion in the first half.
As the effects of the government's $585 billion stimulus package trickled down, China's economy showed signs of recovery, which is in part reflected in the bullish stock and property market, Xinhua news agency reported.
Property sales in the country has climbed 53 per cent year on year to 1.58 trillion yuan ($232 billion) as investors took advantage of low rates before inflationary trends started to gain ground.
Zhu Baoliang, an economist with the State Information Centre, a government think-tank, said the rocketing asset prices and the speculative money inflow are 'relevant'.
"It is so dangerous that it will not only spur inflation, but also add pressure for the yuan's appreciation, which will exacerbate China's exports," he said.
Luxury home sales in China's big cities saw robust growth in the second quarter. An analyst said it is mainly due to increased purchase by overseas buyers.
Figures released by the Beijing Real Estate Transaction Website showed that among the capital's top 30 most expensive residential projects, 993 units were sold in the second quarter, doubling the transaction a year ago.
Zhuang Jian said China's property and equity markets have always been closely watched by international speculative fund holders. He believed that is the main reason behind the foreign reserve surge in the second quarter as he expected gross domestic product will rebound to near eight per cent in that period.
