Qu Hongbin, Chief Economist for China at HSBC Bank (China) Co. Ltd., attributed the decline in part to the depreciation of the euro. A considerable amount of the country's foreign reserves are euro-denominated assets, although the value of the reserves is calculated in U.S. dollars. In an interview with Shanghai Securities News, he said that since last October, the euro had depreciated by almost 10 percent against the U.S. dollar. "If the euro depreciates, their (the reserves') dollar-term value will shrink undoubtedly," Qu said.

Aiding Exporters

The SAFE will relax rules on the prepayments that exporters can obtain in an effort to help them regain their financial positions amid the global economic downturn, which has affected their overseas sales.

The administration said Chinese exporters would be allowed to collect 25 percent of prepayments on exports in foreign currency, up from 10 percent, as of December 23, 2008.

The move is intended to tackle the negative impact of the global financial crisis on exporters and promote stable and relatively fast economic growth, the administration said.

Meanwhile, the State Council announced on December 24 new support measures to revitalize the country's export sector, such as further increasing the rebate rates of electromechanical products with high added value and widening financing of foreign trade.

But the government definitely will not let the yuan depreciate to help exporters because an instable foreign exchange policy would eventually hurt the Chinese economy, said Chen Deming, Minister of Commerce, in an interview with the People's Daily.

China's exports fell 2.2 percent in November year on year, the first drop in almost seven years.

Advertising Spree

Sina Corp., the operator of China's biggest Web portal, announced on December 22 that it had reached an agreement with Focus Media Holdings Ltd. to acquire the latter's outdoor digital advertising business.

Nasdaq-listed Focus Media is the country's largest public-traded advertising company, running a handful of advertising networks in more than 90 cities in China.

The deal may be worth more than $1.3 billion, expediting Sina's long ambition to expand beyond the Internet.

According to the agreement, Sina will purchase Focus Media's business in office buildings, elevators and supermarkets, which accounts for around 52 percent of the advertiser's total revenues.

Sina will issue 47 million new ordinary shares to Focus Media in exchange for the assets.

The deal has received approval from both boards of directors and is expected to be completed by the first half of 2009.

Analysts say Sina could diversify its business by making a foray into the growing outdoor advertising market. This would help the company fare better in a faltering economy, they said.

"We are geared to achieve more synergies through the deal and provide integrated advertising services to the clients," said Cao Guowei, Sina's CEO, in a printed statement.