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December 15, 2016

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PBOC’s yuan funds for forex fall again

THE Chinese central bank’s yuan funds outstanding for foreign exchange fell again in November, burdened by lingering capital outflow pressures amid a weakening yuan against the US dollar.

The funds shed 382.7 billion yuan (US$55.44 billion) month on month to 22.26 trillion yuan, data from the People’s Bank of China showed yesterday.

It is the largest monthly drop this year and marks the 13th consecutive month of decline.

As the yuan is not freely convertible under the capital account, the central bank has to purchase foreign currency generated by China’s trade surplus and foreign investment in the country, adding funds to the money market.

Such funds are a vital sign of cross-border foreign fund flows and domestic yuan liquidity.

Concerns about capital outflows had been rising as the economy slowed, possibility of a US rate hike loomed and the yuan had fallen since China revamped its forex mechanism last year

China’s forex reserves, another sign of capital outflow, fell for the fifth straight month in November to US$3.05 trillion, down US$69.1 billion from October.

The State Administration of Foreign Exchange has dismissed the huge capital outflows.


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