The foreign exchange reserves rose $7.1 billion from March to $3.2197 trillion in April, beating market expectations of 3.20 trillion, official media reported today.
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A weaker dollar, as a result of a less hawkish U.S. Federal Reserve, has lent the Chinese central bank a hand in steadying the yuan and easing outflows–top financial priorities set by the Chinese leadership for this year.
However, analysts believe that Chinese businessmen and individuals have less confidence in the yuan.
“If the dollar strengthens, the yuan likely will depreciate again and capital outflow will also pick up”, said China economist Larry Hu at Macquarie Securities, a Sydney-based investment bank.
According to the reports, China’s gold reserves have also increased to $74.751 billion in April, up from $71.485 billion from prior month.
China has not yet let the yuan become freely floated but the central bank sets a mid-price for the currency every morning and traders are allowed to deal in a 2 per cent range on the reference price.
In the past two months, China mostly boosted yuan fixing to catch up gains against the falling dollar.
Capital outflows from China have begun to ease, according to recent data from the State Administration of Foreign Exchange (SAFE), with net foreign exchange sales by commercial banks in March only slightly up at $36.4 billion, and considerably lower than $54.4 billion in net sales earlier in January.
Meanwhile, China says it will extend the range of qualified foreign institutional investors. They forecast the yuan will end 2016 at 6.67 against the USA dollar.
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Even so, the headline reserves number may be stronger than it looks, as the yen and euro rose against the greenback last month, boosting China’s dollar-denominated multi-currency stockpile.
