BEIJING, Jan 13:China's foreign exchange reserves hit $1.0387 trillion at the end of November, according to a paper by two researchers at the People's Bank of China that warned of difficulty managing further capital flows into the country.

China's trade surplus will remain huge in 2007 but its growth could slow, the deputy head of PBOC's research department, Jiao Jinpu, and Liu Xiangyun, of the department's monetary policy division, said in the paper.

The continous depreciation of the US dollar in recent times may trigger massive foreign investments into China, which means the central bank will continue to face difficulty in controlling liquidity in 2007, Jiao and Liu said in the paper, presented to a conference on China's capital markets.

Inflation may pick up in 2007 due to price increases in food and grains prices, the paper said, without elaborating.

China's stockpile of forex reserves, the world's largest, stood at $1.0096 trillion at the end of October, according to domestic media reports.—Reuters