Chinese banks, including the central bank, brought a record US$16 billion home from overseas in the fourth quarter, according to the Bank for International Settlements (BIS).
The withdrawal, including from deposits in the US and UK, came amid speculation that China will loosen the yuan's fixed exchange rate of about 8.3 per US dollar.
The value of assets in China, such as bonds and stocks, may appreciate in the event the yuan was allowed to strengthen.
The repatriation, coupled with the return of money to South Korea by banks from that country, resulted in a net US$10 billion inflow of money to the Asia-Pacific region for the first time in six quarters, the BIS said in its quarterly report.
At the same time, Malaysia's central bank sent more money abroad, as did the Taiwanese and Indian banks, including the Reserve Bank of India.
"Large deposit repatriations by banks in China and Korea offset increased placements abroad by banks in Malaysia, Taiwan and, to a lesser extent, India," the report said in a chapter written by BIS employees Patrick McGuire and Nikola Tarashev.
"In some cases, the change in deposit liabilities seemed to reflect central bank activity," they said.
"Continued repatriation could mean that the Chinese are avoiding a large one-off revaluation loss on their dollar-denominated assets" when the yuan strengthens, said Joseph Tan, a Singapore-based economist at Standard Chartered Plc. "It could also be to recapitalize the banks and the financial sector."
Chinese President Hu Jintao (
The repatriation may also reflect restrictions adopted in July last year that limited the ability of foreign banks in China to borrow money overseas, McGuire and Tarashev wrote.
"As a result, banks operating in China may have been repatriating the funds previously deposited in banks abroad to meet demand for dollar credits in China," the BIS report said.
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