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May 8, 2017

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China’s forex reserves rise for 3rd consecutive month

PRESSURE from capital flight has eased markedly as the Chinese economy firms up and the yuan stabilizes against the dollar, according to central bank data.

China’s forex reserves rose for the third month in a row in April, bank data showed yesterday.

Forex reserves climbed to US$3.0295 trillion at the end of April from US$3.0091 trillion a month earlier, up 0.7 percent month on month, according People’s Bank of China statistics.

This was the first time since June 2014 that reserves had expanded for three consecutive months.

The country’s gold reserves also increased from US$73.7 billion by the end of March to over US$75 billion by the end of April.

The State Administration of Foreign Exchange attributed the continuous rise of forex reserves to stable cross-border capital flow and yuan appreciation.

Chinese enterprises have become more rational in buying forex thanks to a firmer economy and a stable yuan, the administration said in a statement, adding that the size of forex reserves would become more stable as the economy maintains steady expansion and the foreign exchange rate stays in a reasonable range.

Concern was growing about capital flowing out of the Chinese market in the second half of 2016, when the economy was facing looming downward pressure and the yuan was in the middle of a losing streak against the dollar.

In January, China’s forex reserves declined below the closely watched US$3 trillion mark for the first time since February 2011.

However, concerns about capital outflows have receded lately, with the Chinese economy on a firmer footing, supported by a string of upbeat data, including industrial profits, factory activity and fixed-asset investment.

The Chinese economy expanded 6.9 percent in the first quarter this year, up 0.1 percent compared with the last quarter of 2016.

However, the world’s second-largest economy showed signs of softening momentum as the latest PMI data pointed to slower expansion of manufacturing and services in April.

Last Wednesday, the US Federal Reserve left its benchmark interest rates unchanged as it waited on more data to assess the US economic outlook.


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