The explosive first-quarter growth of foreign exchange reserves came from not only the trade surplus, but also the overseas stock market successes of Chinese companies and currency swaps, a central bank vice-governor said.

But economists said the gap between the new reserves and trade surplus may be explained by more factors, such as the country's returns on its investment in US treasury bonds and previously uncounted non-manufacturing foreign direct investment (FDI).

Foreign exchange reserves hit $1.2 trillion, the world's largest, by the end of March, up 37.36 percent year on year.

In the first quarter, reserves increased by $135.7 billion.

The increase was about $73.4 billion more than the total of China's trade surplus of $46.4 billion plus its FDI of $15.9 billion during the same period, leaving people bewildered where the money had come from.

Funds raised from IPOs by the overseas-listed enterprises, which are denominated in foreign currencies and have been sold back to the central bank, contributed to the swelling reserves, Wu Xiaoling, vice-governor of the People's Bank of China, told reporters on the sidelines of a seminar in Guangzhou over the weekend.

Wang Qing, an economist with the Bank of America in Hong Kong, said China's macroeconomic measures since the second half of last year could have encouraged the banks to place funds offshore to make more profits than if they used the money for lending domestically.

But the recent easing of the macroeconomic policies may have led to the banks pulling the money back for domestic lending, Wang said.

Analysts also said they may have opted to remit the money to the mainland and convert it into renminbi for the expected revaluation of the yuan.

Wu also confirmed market suspicions that the unwinding of currency swaps between the central bank and commercial banks is another factor behind the growth in the reserves.

A currency swap involves agreement between two parties to exchange a given amount of one currency for another and, after an agreed period of time, to give back the original amounts exchanged.

The Standard Chartered Bank in Hong Kong said there may be more factors for the unusual growth of China's reserves.

While China made returns on its investment in the US treasuries, which are included in its foreign exchange reserves, its non-manufacturing FDI, including real estate and services sector investment not counted by the Ministry of Commerce, may explain part of the increased reserves, said the bank in a note.

Vice-Governor Wu also said macroeconomic controls had had some effect, as seen in the data released last week.

She said credit growth will further slow as the authorities tighten market liquidity.

Editor: Yan