BEIJING, March 4 (Reuters) - China can only spend its foreign exchange reserves abroad, not domestically, in support of its economic stimulus programme, a central bank official was reported as saying on Wednesday. Su Ning, deputy governor of the People's Bank of China, said the forex reserve stockpile could not be used directly at home since that would require conversion into yuan and would ultimately just put more of the Chinese currency into circulation, the China Securities News reported.
Althouth Su was simply stating what most economists see as a basic truth about forex reserve management, his comments help clarify comments earlier this year by Premier Wen Jiabao about China using the reserves to support the economy.
That had sparked questions about how China might seek to tap its reserve stockpile, the world's biggest at 1.95 trillion yuan ($285 billion), with some analysts saying the central bank might transfer a slice of it to the finance ministry for spending at home.
Forex reserves can be used abroad for the aquisition of key imports, to provide trade financing for Chinese companies that have trouble accessing credit or even to buy overseas-listed stocks in Chinese firms, Merrill Lynch economists have said.
Su also said in the interview with the official securities newspaper that China has never manipulated the exchange rate of the yuan, but rather has managed a fluctuating rate. ($1=6.841 Yuan) (Reporting by Simon Rabinovitch; Editing by Ken Wills)