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January 17, 2017

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Yuan funds for forex drop in December

THE central bank’s yuan funds outstanding for foreign exchange declined again in December as capital outflow continued.

The funds declined 317.8 billion yuan (US$46.1 billion) in December month on month to 21.94 trillion yuan, data from the People’s Bank of China showed Monday. December was the 14th consecutive month of decline.

As the Chinese currency 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 an important indicator of cross-border foreign capital flow and domestic yuan liquidity. China’s forex reserves fell for the sixth straight month in December by US$41.1 billion to US$3.01 trillion, as the PBOC used them to balance the forex market and currencies weakened against the US dollar. Despite recent drops, China is still home to the world’s largest forex reserve.


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