BEIJING: China’s foreign exchange reserves fell by some $16 billion in August, officials said yesterday, as the country’s central bank sold dollars to defend its currency against capital outflows. The world’s largest currency hoard fell to just under $3.19 trillion, the People’s Bank of China (PBOC) said on its website.
Analysts said the fall indicated China is selling foreign exchange to buy its currency the yuan amid capital flight spurred by the slowing growth in the world’s second largest economy. The fall was larger than July’s decline of $2 billion and bought China’s reserves to their lowest level since late 2011, the official Xinhua news agency said. “Although concerns about China are no longer front page news, capital outflow pressures haven’t gone away,” research firm Capital Economics said in a note on the figures. “We expect the PBOC to respond to continued outflow pressures by allowing further gradual renminbi depreciation,” it added. China’s total forex reserves peaked at $4 trillion in 2014. But the country’s growth has slowed since then, putting pressure on the yuan to depreciate.
The Asian giant’s economy expanded at 6.7 percent in the April-June period, the same as the first three months of the year and slowing from 6.9 percent in 2015 — its weakest annual rate in a quarter of a century. China is seeking to restructure its economy to make the spending power of its nearly 1.4 billion people a key driver for growth, instead of massive government investment and cheap exports. The US federal reserve indicated in late August that it might raise interest-rates in the near-term, a move likely to put further pressure on the yuan. — AFP