Nov. 29 (Bloomberg) -- China's foreign-exchange reserves rose to a record $1.46 trillion in October, increasing the risk of economic overheating as the soaring trade surplus pumps cash into the financial system.

Zhang Xiaoqiang, deputy head of the National Development and Reform Commission, gave the Oct. 31 figure at an investment conference in Beijing today. The reserves were $1.43 trillion a month earlier. They're the world's biggest.

The trade surplus jumped to $27 billion last month, stoking tensions with the U.S. and Europe and threatening to fuel decade-high inflation. China's government has urged banks to rein in lending and this month raised the proportion of deposits that they must set aside as reserves for the ninth time this year, to 13.5 percent.

``The rapid increase in currency holdings remains a concern,'' said Sun Mingchun, an economist with Lehman Brothers Inc. in Hong Kong. ``Banks' reserve requirements may increase to as high as 17 percent next year,'' he said.

The proportion of deposits that lenders must park with the central bank was 9 percent at the start of the year.

The increase in currency reserves in October was $21 billion, according to the figure provided by Zhang today. That's about half of the average for the first 9 months of about $40 billion. The pace of increases from one month to the next has slowed since the end of July.

China Investment Corp.

Transfers of reserves to China Investment Corp., the sovereign wealth fund established this year, are one reason for the smaller gains, according to Sun. The expansion of a program that lets financial companies invest abroad is another. An easing of restrictions on individuals' foreign-exchange purchases is a third, he said.

Lou Jiwei, the chairman of the $200 billion fund, told a conference in Beijing today that the money allocated was more than he wanted and the fund was under great pressure to invest.

Premier Wen Jiabao referred to the reserves as an asset and a burden in a speech this month in Singapore.

``We now have $1.4 trillion in foreign exchange reserves, and I tell my foreign friends I have never been under more pressure,'' Wen said. ``Such a massive reserve is both our strength as well as our huge responsibility.''

The central bank has raised interest rates five times this year. The key one-year lending rate is at a nine-year high of 7.29 percent. Inflation is at a decade high of 6.5 percent.

Lou signaled today that CIC may invest in companies weakened by subprime mortgage defaults.

``CIC wants to be a stabilizing force in the international capital markets,'' he said, citing a ``recent example'' in which a similar fund invested in a financial institution with subprime losses.

To contact the reporter on this story: Li Yanping in Beijing at yli16@bloomberg.net

Last Updated: November 29, 2007 04:44 EST