CHINA’S foreign exchange reserves fell for the fifth month in September but the decline narrowed, indicating milder capital outflow pressure.
The reserves decreased by US$43.26 billion in September, slower from the record US$93.9 billion decline in August when the central bank engineered a 3 percent devaluation of the yuan against the US dollar, the People’s Bank of China said yesterday. The monthly fall also outperformed expectations for US$57 billion, according to a Bloomberg survey of economists.
The stockpile stood at US$3.514 trillion by the end of September, 12 percent off its peak of nearly US$4 trillion by the end of June last year, but remained the world’s largest.
Economists said the figure showed that capital outflow continued but the pace was slower, and the central bank will still take measures to stabilize the yuan’s exchange rate.
“The market is coping with the changes of yuan exchange rate in September with relatively weak sentiment,” the China Merchants Securities said in a note yesterday. “But the central bank’s measures to counter market expectations are taking effect, reducing panic sales and speculative trading.”
The note said China’s foreign exchange reserves may continue to fall in the coming months, as the global market worries about US monetary policies.
Ding Shuang, chief China economist at Standard Chartered Bank, said he expected capital outflow from China to slow down in the coming months as companies had improved their foreign debt structure, helping offset foreign exchange outflow.
The central bank will still try to stabilize the yuan’s exchange rate, but interference will be milder as capital outflow pressure eases, Ding said.
Fuelled by exports, China’s foreign exchange reserves have been growing for more than a decade to peak in June 2014.
China’s foreign exchange watchdog last Wednesday attributed recent declines in the reserves to shrinking valuation of non-US dollar assets, companies and banks adjusting their debt structure, overseas investment of companies and overseas spending by tourists.
The State Administration of Foreign Exchange said long-term investment capital is still flowing into China as foreign direct investment continues to build up and fundraising is still active for Chinese firms listed overseas.