BEIJING, Oct. 17 -- China won't use its foreign exchange reserves to buy energy products, including oil, the official Securities Times reported a senior official at the central bank as saying.

    People's Bank of China Vice Governor Wu Xiaoling said the central bank isn't allowed to directly use foreign exchange reserves to buy energy assets, said the report Monday.

    Any parties that want to use China's foreign exchange reserves should use their yuan to buy foreign exchange funds from the central bank, Wu was cited as saying.

    China's foreign exchange reserves totaled 769 billion U.S. dollars at the end of September, up 50 percent from the same month a year earlier.

    The strong growth of the reserves, largely boosted by the country's surging trade surplus, has created excess liquidity and added upward pressure on the yuan.

    The abundant liquidity has also fueled the country's economic expansion, with China's economy surging 10.9 percent in the first half of 2006 from a year earlier.

    The Chinese Academy of Social Sciences, a government think tank, forecast earlier this month that China's gross domestic product is likely to grow 10.5 percent in 2006. It urged the government to step up its macroeconomic controls by raising interest rates "appropriately."

    Wu said in the report that China's economic development will determine whether rate hikes are needed. She didn't elaborate.

    She was also cited by the report as saying that domestic inflationary pressures have eased due to the recent fall of global oil prices. But there is still pressure on consumer prices to rise further as the government continues to reform its energy product pricing system to let it more accurately reflect market forces, she said.

    (Source: Shenzhen Daily)