China forex reserves fall almost $100bn in January

GMT 10:53 2016 Monday ,08 February

Arab Today, arab today China forex reserves fall almost $100bn in January

Worries about China's economy
Beijing - AFP

 China’s foreign exchange reserves have fallen to their lowest level in more than three years, the central bank said Sunday, as Beijing sells dollars to stop the yuan from depreciating further.

The world's largest currency hoard shrank by $99.5 billion in January to some $3.2 trillion, the People’s Bank of China said on its website, the lowest since May 2012.

Worries about China's economy have pushed the yuan to a five-year low. The country saw its first-ever annual decline in foreign exchange reserves last year as Beijing tried to prevent a more drastic devaluation.

The PBoC is selling dollars to buy yuan amid a capital flight spurred by the slowing growth in the world's second largest economy.

But some analysts predict a more drastic weakening of the yuan this year and question China's ability to continue rapidly shedding the reserves.

"While the remaining reserves represent a substantial war chest, the rapid pace of depletion in recent months is simply unsustainable," IHS Global Insight economist Rajiv Biswas told Bloomberg News.

Outflows increased "as expectations mount that the PBoC will eventually be forced to capitulate once its reserves are sufficiently depleted", he added.

George Magnus, economic commentator and associate at Oxford University's China Centre, wrote on Twitter: "China's fx reserves fell another $100bn... clearly this can't go on for long."

The pace of decline in the reserves in January was slower than December, which at some $108 billion was the largest monthly drop on record.

China has also tightened some capital controls to try to curb outflows.

"The smaller decline in the reserves suggests that some capital outflow restrictions imposed in January worked," Shen Jianguang, chief Asia economist at Mizuho Securities, wrote in a note.

The drop in February will be much smaller, he added.

China has set its growth target for this year at between 6.5-7 percent, the top economic planner said Wednesday, an acknowledgement that expansion -- already at its slowest pace in 25 years -- will continue to weaken.

Global investors are closely watching the slowdown in the world's second largest economy, which has created turbulence in world markets.


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