China's foreign-exchange reserves have exceeded a "reasonable" level, said the central bank governor on Monday, resulting in excessive liquidity which was partly blamed for the stubbornly high inflation.

"Foreign-exchange reserves have exceeded the reasonable levels that we actually need," Zhou Xiaochuan said after a speech in the Tsinghua University in Beijing, domestic media reported.

The country's foreign currency holdings surged nearly $200 billion in the first quarter to $3.04 trillion. The hike is putting pressure on central-bank operations that take money out of the financial system, said Zhou.

To slow down the pace of the accumulation, the Chinese government has been trying to reduce trade surpluses which are a major source of the foreign currency.

Zhou also emphasized the need to improve the management and diversification of the existing holdings.

"One option is to consider some new types of investment agencies which focus on new investment areas," including the China Investment Corporation (CIC), he said.

The CIC is the country's sovereign wealth fund which had total assets of $332 billion at the end of 2009, according to the latest financial reports available. Its mandate is to earn a better return out of the forex under its management.

But the top Chinese banker refused to say whether the CIC will receive more capital injections from the vast forex reserves.