Fund outflows manageable on trade surplus
Print Edition
CHINA is monitoring closely its cross-border capital outflows amid indications that funds are pulling out from the world’s second-largest economy, the foreign exchange regulator said yesterday.
But the State Administration of Foreign Exchange said risks from capital outflow are manageable as the country is posting a solid trade surplus.
“China’s cross-border capital flows face many uncertainties,” Guan Tao, head of the department of international payments at SAFE, told a news conference.
He pointed out the uncertainties are triggered by the twin moves of the yuan exchange rate, the US Federal Reserve’s ditching its quantitative easing policy and a stronger dollar.
Still, China may see a relatively big current account surplus this year, he said.
The yuan positions on the People’s Bank of China’s balance sheet fell 128.9 billion yuan (US$20.8 billion) in December from a month earlier, the most since 2003. Meanwhile, the nation’s trade surplus climbed to a record US$54.5 billion in November and was US$49.6 billion last month.
“Having trade surpluses and capital outflows will become normal,” Guan said.
He reiterated that SAFE will monitor cross-border capital flows and warn early of any unusual movements, as well as curb illegal capital flows.
Chinese banks sold a net US$46.5 billion in spot foreign exchange settlements in the fourth quarter of 2014, up from US$16 billion in the third quarter, SAFE said. For 2014, Chinese banks still bought a net US$125.8 billion worth of foreign exchange.
China’s economy grew at its slowest rate in 24 years of 7.4 percent last year, and a further slowdown is seen this year due to a cooling housing sector.
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