BEIJING — Decline in China’s foreign exchanges reserves in August was due to its normal market operations and dropping prices of major financial assets on the global market, the central bank said on Sept 8.
China’s forex reserves fell for a fourth straight month to $3.56 trillion at the end of August, the People’s Bank of China (PBOC), or the central bank, announced on Sept 7.
The PBOC attributed the drop partly to its market operations to provide enough liquidity, as commercial banks, companies and individuals held more foreign currencies following a sharp depreciation of the yuan last month.
On Aug 11, the central bank decided to let the market have a greater say in forming the yuan’s central parity rate against the US dollar, leading to a depreciation of more than 4 percent last month.
In August, Chinese companies and individuals saw holdings of foreign exchange deposits up $27 billion from July, PBOC data showed.
The central bank said drawings from commercial banks to make forex loans to companies and the dropping value of major financial assets on the global market also contributed to the decline last month.
Against a strong US dollar, other major currencies including the euro and Japanese yen saw depreciation last month, hurting the value of China’s forex reserves.
In the medium and long term, China will continue to see a medium-high economic growth pace and current account surplus, meaning China will continue to enjoy abundant forex reserves, the PBOC said.
“Rises and falls in forex reserves will be normal in the future with the improvement of yuan’s exchange rate formation system and the continuous internationalization of yuan,” it said.