Mainland foreign-exchange reserves have risen so slowly this year, despite a large surplus, because of delays in payments for exports, a cut in domestic interest rates and export firms retaining more of their profits in hard currency. The China Economic Times yesterday explained one of the puzzles of the economy this year: a trade surplus of US$22.6 billion in the first six months but reserves rising only $620 million during the period to reach $140.5 billion at the end of June. In the previous four years, the reserves rose more than $20 billion each year thanks to large trade surpluses. As from last October, the government allowed mainland firms with substantial import and export business to retain a portion of their foreign-currency earnings. By the end of last year, 621 had opened such accounts, with the money totalling $5.9 billion. In the first half of this year, billions more were added to these accounts. In March, the central bank cut interest rates on yuan deposits, making them closer to rates on foreign-currency deposits, encouraging firms and individuals to hold US dollars. In the first half of the year, accounts held by individuals increased by several billion US dollars. In addition, the mainland provided at least $2 billion in loans to Indonesia to help it during its financial crisis. Because of the Asian crisis, firms in Southeast Asia postponed payments of billions of dollars for imports of goods from the mainland. The final factor was the increasing share of the mainland's exports produced by foreign-invested companies, especially of goods processed from imported raw materials. On such exports, the mainland receives only a small profit from the processing fee, lower than for other exports, while the earnings from them are often booked abroad. In the first half of the year, such processed exports amounted to $47.63 billion, accounting for 61.4 per cent of exports.