China's excessively large trade surplus is the source of inflation and multiple measures should be taken to deal with inflation, said Yi Gang. Yi, the vice-governor of the People's Bank of China (PBOC) and head of the State Administration of Foreign Exchange, made the comments at a forum held in Beijing on Saturday, the Beijing News reported Sunday.

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Yi said that at the end of the 2010, China's foreign exchange reserves totaled $2.85 trillion, and the PBOC had to roll out approximately 20 trillion yuan ($3.04 trillion) to keep the exchange rate stable.

He said it is urgent to expand the domestic demand and reduce trade surplus during the 12th Five-Year Plan (2011-2015) period. China could reduce its trade surplus by increasing imports rather than simply cutting exports, he added.