China and Japan, the two largest foreign-exchange reserve holders¹ in the world, should join hands to ward² off unfavorable fluctuations³ in a global financial market dominated by American and European currencies, a senior Chinese researcher said yesterday.

"China and Japan each has more than $1 trillion in foreign exchange reserves, they both spend a lot of the reserves buying American bonds and financial products and bear the risks and losses from the depreciation⁴ of the US dollar," Zheng Xinli, vice-director of the Policy Research Office of the Central Committee of Communist Party of China, said at the Beijing-Tokyo Forum⁵.

China's foreign exchange reserves exceeded $1.8 trillion at the end of June, compared to $1.002 trillion in Japan. The weakening of the US dollar in the past year has stirred debates in both countries on how to keep the cash pile from shrinking.

Zheng said neither of the two Asian countries' currencies could enjoy the status of universal money, with the Japanese yen⁶ in the shadow of the greenback and the euro and China's renminbi not in a condition to be fully⁷ convertible⁸.

Moreover, China and Japan were both "victims" in the Asian financial turmoil⁹ in the late 1990s as well as the ongoing¹⁰ US subprime mortgage crisis, he added.

For years, Asian economists¹¹ have called for financial integration¹² and even a common currency in East Asia to make the region more financially competitive. But the vision is far from being materialized given the big disparity in monetary¹³ and foreign exchange reserves policies in countries in the region.

Zheng said China and Japan, which account for more than 80 percent of the GDP in East Asia, should work together to push forward regional financial integration and the creation of a common currency.

Questions:

1. How much each does Japan and China both have in foreign exchange reserves?

2. How much do China and Japan, account for of the GDP in East Asia?

Answers:

1. More than $1 trillion.

2.  More than 80 percent.