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Forex level dips but is seen as adequate

Wang Yanfei
Updated: Feb 8,2017 8:05 AM     China Daily

China’s foreign exchange reserves dropped in January to $2.998 trillion, falling below the $3 trillion level for the first time since early 2011 and showing that capital outflow pressure persists.

Analysts expect the decline to slow in the next couple of months with Beijing’s move to curb capital controls and as seasonal factors decline.

The central parity rate of the yuan set by the central bank strengthened to 6.8604 against the dollar on Feb 7.

The offshore yuan retreated on Feb 7 afternoon soon after the data was released, trading at 6.8354 against the dollar as of 5:30 pm.

The State Administration of Foreign Exchange, the nation’s top currency regulator, said on Feb 7 that the forex level remains adequate and not too much should be read into the figure.

Xie Yaxuan, chief economist with China Merchants Securities, attributed the decline to the reset of the $50,000 annual foreign exchange quota in January, as well as rising demand for foreign exchange for overseas travel. An estimated $15 billion to $30 billion worth of foreign currency was purchased by individuals in January, according to Xie.

The latest steps by the central bank will help ease depreciation pressure on the yuan and raise the cost of moving money out, according to Wang Youxin, an economist at the Institute of International Finance affiliated with Bank of China.