China reserves rise to $3.14trn, highest since Sept 2016



China’s foreign reserves rose to their highest in more than a year in December.

It is beyond economists’ estimates as tight regulations and a strong yuan continued to discourage capital outflows, central bank data showed.

Notching up their 11th straight month of gains, reserves rose 20.2 billion dollars in December to 3.14 trillion dollars, the highest since September 2016 and the biggest monthly increase since July.

That compares with an increase of 10 billion dollars in November.

Economists polled by the Media had expected reserves to rise by six billion dollars to 3.125 trillion dollars.

Capital flight had been seen as a major risk for China at the start of 2017, but a combination of tighter capital controls and a faltering dollar helped the yuan stage a strong turnaround, bolstering confidence in the economy.

The yuan rose around 6.8 per cent against the greenback in 2017, recovering from a 6.5 per cent loss in 2016 and reversing three straight years of depreciation.

For the full year, China’s reserves rose 129.5 billion  dollars from $3.011 trillion at the end of 2016. That’s the first annual rise since 2014.

China’s foreign exchange regulator said in a statement on its website that it would keep the nation’s foreign reserves and international balance of payments “balanced and stable” in 2018.

The country’s reserves dropped by nearly one trillion dollars from a peak of 3.99 trillion dollars in June 2014 to 2.998 trillion dollars in January 2017 as it sought to shore up the yuan and reduce potentially destabilising capital outflows.

But reserves have since climbed by 142 billion dollars.

Despite the improved capital flow picture, China’s State Administration of Foreign Exchange has continued a clampdown on the movements of funds abroad.

The regulator announced last month it would cap overseas withdrawals by people using domestic Chinese bank cards starting this year.

Some major global acquisitions by Chinese firms have also been put on ice by regulators who fear they are really intended to disguise movements of capital offshore, though Beijing has maintained genuine investments will still be approved.

China’s central bank reported net foreign exchange buying for the third consecutive month in November, marking a policy victory for the authorities after a long battle to stabilise the yuan, although analysts say capital flows are likely to remain volatile as the economy slows.

Economists polled by the Media expect the yuan to depreciate slightly this year if the dollar firms.

The value of gold reserves rose to 76.47 billion dollars at the end of December, from 75.833 billion dollars at the end of November, data on the People’s Bank of China’s website showed.


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