Feb 7 China’s foreign exchange reserves, the world’s largest, fell by $99.5 billion in January, the central bank said in a statement on Sunday.
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At $3.23 trillion, China still has the world’s biggest reserve of foreign currency holdings.
The lower was milder than a month-on-month decline of $ 108 billion registered in December, which was the sharpest month-to-month fall on report, Xinhua cited knowledge from the People’s Bank of China (PBOC) as saying.
Meantime, China’s financial markets will be closed this week for celebrations of the Lunar New Year, giving authorities some breathing space.
The People’s Bank of China has stepped up efforts to stem the exodus, warning speculators they would be punished.
The PBoC now finds itself facing conflicting goals: while the central bank strives to maintain renminbi stability and prevent the currency from weakening further, it must keep cash flowing in the financial system to avoid liquidity shortage.
“Domestic private investors and global currency traders see a one-way bet against the currency. This has resulted in large-scale private capital outflows since early 2015 as expectations mount that the PBOC will eventually be forced to capitulate once its reserves are sufficiently depleted”, Biswas said.
Capital outflows increased to US$158.7 billion in December, the most since September and were US$1 trillion past year, according to estimates from Bloomberg Intelligence.
In 2015 as a whole, reserves dropped by a more than USD510 billion.
Capital outflows have gained momentum since the yuan’s August devaluation, fanned by concerns about China’s economic slowdown and expectations of United States interest rate rises.
Compared with interest rates and RRR cuts, open-market operations and medium-term lending are more flexible tools to increase money supply in the economy. The country’s central bank set its official yuan midpoint rate at 6.5419 in onshore yuan market, the strongest fixing in nearly two months, as the dollar tumbled in global markets.
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Although that 12-month consensus is just about 4 per cent lower than Friday’s trading rate of 6.56, it is the weakest median since comparable polling on the currency began three years ago.
