Lenders' forex purchases decline in June
By Feng Jianmin |
July 23, 2013, Tuesday
|
Print Edition
Print Edition
CALLS for easing monetary policies mounted after China reported its first decline in foreign exchange purchases by domestic financial institutions in six months, indicating possible liquidity strain from the foreign capital outflow.
Yuan positions at Chinese financial institutions accumulated from purchase of foreign exchange, an indicator of cross-border money flow, fell 41.2 billion yuan (US$6.7 billion) in June from May to 27.39 trillion yuan, the first month-on-month decline since last November, data from the People's Bank of China showed yesterday.
The net sales followed a significant slowdown of purchase in May to 67 billion yuan from an average 377 billion yuan monthly purchase in the first four months.
The data includes foreign exchange purchases and sales by commercial banks and other financial institutions but mostly reflects transactions by the central bank.
Analysts have attributed the decrease in foreign exchange purchase to measures taken by authorities to crack down on illegal capital flows in May, and said China may need to loosen its monetary policies to counter continued capital outflow.
"We believe China will experience a prolonged period of capital flows until the first half of next year as growth slows and investors worry about a potential economic hard landing," said Zhang Zhiwei, an economist with Nomura International (HK) Ltd. "China will need to cut the reserve requirement for banks to offset any negative impact from capital outflows on domestic liquidity conditions."
China's gross domestic product growth slowed to 7.6 percent in January to June of 2013, the weakest first-half performance in three years.
Growth in the second quarter stood at 7.5 percent, down from 7.7 percent during the first quarter, National Bureau of Statistics data showed.
Meanwhile, China's exports took a surprising tumble in June, falling 3.1 percent year on year to US$174.32 billion.
Yuan positions at Chinese financial institutions accumulated from purchase of foreign exchange, an indicator of cross-border money flow, fell 41.2 billion yuan (US$6.7 billion) in June from May to 27.39 trillion yuan, the first month-on-month decline since last November, data from the People's Bank of China showed yesterday.
The net sales followed a significant slowdown of purchase in May to 67 billion yuan from an average 377 billion yuan monthly purchase in the first four months.
The data includes foreign exchange purchases and sales by commercial banks and other financial institutions but mostly reflects transactions by the central bank.
Analysts have attributed the decrease in foreign exchange purchase to measures taken by authorities to crack down on illegal capital flows in May, and said China may need to loosen its monetary policies to counter continued capital outflow.
"We believe China will experience a prolonged period of capital flows until the first half of next year as growth slows and investors worry about a potential economic hard landing," said Zhang Zhiwei, an economist with Nomura International (HK) Ltd. "China will need to cut the reserve requirement for banks to offset any negative impact from capital outflows on domestic liquidity conditions."
China's gross domestic product growth slowed to 7.6 percent in January to June of 2013, the weakest first-half performance in three years.
Growth in the second quarter stood at 7.5 percent, down from 7.7 percent during the first quarter, National Bureau of Statistics data showed.
Meanwhile, China's exports took a surprising tumble in June, falling 3.1 percent year on year to US$174.32 billion.
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