The foreign exchange reserves of China, the Asian Tiger, surged in the fourth quarter by a record amount while the circulating money within the economy also climbed more than expectations in the month of December as per government statistics released Tuesday that underline the country’s worsening inflation dilemma.

Renminbi is being printed at a furious pace by the Chinese government for buying foreign currencies such as the euro and the dollar that pouring into the country's kitty through foreign investment and trade surpluses. Central bank of China, the People's Bank of China, is making such an effort to hold down the value of renminbi and maintain a competitive advantage in foreign market for exporters in China and the millions employed there.

Diana Choyleva, an economist in Hong Kong for Lombard Street Research said “Considering that they engineered the most dramatic monetary expansion in their own history and in the world’s since World War II, there was a large monetary overhang” even before the recent intervention in the currency market. Choyleva also remarked that the China’s inflation problem can go worse due to the additional renminbi issued to pay for rising foreign exchange reserves.

William Belchere, the chief global economist at Mirae Asset, a big South Korean financial firm, said, “Apparently, their jawboning to the banks is not working as effectively as they’ve wanted.”

The Chinese Central bank said that broadly measured money supply of the country, known as M2, was 19.7 percent higher in December than a year earlier; economists had been forecasting an increase of 19 percent.