China forex reserves fall by record
Print Edition
CHINA’S foreign exchange reserves, the world’s largest, posted their biggest annual drop on record in 2015, adding to worries about growing capital outflows that are dragging the yuan to multi-year lows.
Foreign exchange reserves fell US$512.66 billion in 2015 to US$3.33 trillion, central bank data showed yesterday.
They dropped US$107.9 billion in December alone, the biggest monthly decline on record and more than markets had expected. Economists polled by Reuters had expected reserves to end the year at US$3.4 trillion.
Nearly two thirds of the year’s drop came between August and December, hinting at the scope of the central bank’s attempts to stabilize the yuan after its surprise devaluation of the currency on August 11.
“The sharp fall in foreign exchange reserves indicates increased pressure on capital outflows,” said Li Huiyong, an economist at Shenyin and Wanguo Securities, adding that he believed the People’s Bank of China still has ample ammunition to defend the yuan.
But many economists worry about the rapid fall in forex reserves, as the central bank had to sell dollars and buy the yuan to support the local currency last year, effectively draining more liquidity from the banking system at a time when the world’s second-largest economy was already slowing.
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