Foreign currency holdings of Chinese corporates as well as individual dealers have touched a staggering $80 billion till August this year.

Compared to this, Hong Kong's foreign exchange reserves are estimated at $92.1 billion as on end-August and China's own holdings stood at $140 billion.

Market analysts note that this is the first time that China has quantified the magnitude of forex hoarding as well as evasion of hard currency controls as a result of mounting pressure on the yuan from exporters.

Director-general of state administration of foreign exchange (safe) Wu Xiaoling here told newspersons that the government had initiated measures to stabilise the yuan while checking capital flight and illegal foreign currency deals.

She, however, clarified that these measuresdid not mean a return of capital controls and assured that convertibility on current account would remain.

The official again ruled out devaluation of the yuan on the grounds that it would do more harm than good to China, the region and the world at large.

The yuan's value is market-driven and decided by economic fundamentals and we have a surplus on both current and capital accounts apart from $140 billion in reserves besides $80 billion held by corporates and individuals, Wu said.

On whether a devaluation would come next year, she said "no one can guarantee such a phenomenon. We should look at the reasons if we devalued, it would put more pressure on foreign debt and investors would remit their profits."

A large country like China cannot rely on devaluation to revitalise its economy, but must focus on increasing domestic demand, she said.

Referring to government measures to curtail holdings, Wu said she had ordered companies to immediately expatriate the forex stashed abroad.

This is not a newpolicy but an attempt to stem illegal activities of some enterprises and has nothing to do with the normal capital funds of enterprises investing abroad, Wu said.

Official figures indicated that the large trade surplus of $30 billion was not accompanied by an increase in forex reserves during the first six months of 1998.

Wu attributed this to increasing customs frauds and the rule which allows trading firms to retain 15 per cent of their export earnings since last October.