China’s foreign exchange reserves shrank by US$43.3 billion last month as the central bank stepped up intervention to stabilize the yuan and calm sentiment after a surprise devaluation of its currency had jolted global markets.
China’s reserves, the world’s largest, dropped to US$3.514 trillion last month, the People’s Bank of China (PBOC) data showed yesterday, after a record slide of US$93.9 billion in August.
The devaluation of the yuan on Aug. 11, and the consequent fall in reserves, has raised questions about how sustainable China’s efforts to support the yuan are, as capital trickles out of the country due to fears of a deepening economic slowdown and prospects of rising US interest rates.
Analysts expect the reserves to fall further.
“The decline in China’s foreign reserves, while less than market expected, still shows that China’s central bank continued the market intervention in the past month,” Commerzbank senior economist in Asia Zhou Hao (周浩) said.
“As PBOC also intervened into the forward market in the past month, the foreign reserves will likely plunge again when these forward contracts mature,” he said.
The value of China’s gold reserves stood at US$61.2 billion at the end of last month, down from US$61.8 billion at the end of August, the central bank said on its Web site.
China’s IMF reserve position stood at US$4.69 billion, down from US$4.73 billion the previous month. It held US$10.47 billion of IMF Special Drawing Rights at the end of last month, down from US$10.53 billion at the end of August.
The central bank in July shifted to reporting its foreign exchange reserves on a monthly basis after adopting the IMF’s Special Data Dissemination Standard. The bank had previously released the data on a quarterly basis.
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