China’s foreign exchange reserves last month fell more than expected to a five-month low, as the US dollar rebounded and on growing signs that Chinese regulators are less worried about capital flight.
Reserves fell US$17.97 billion to US$3.125 trillion — the lowest since November last year, compared with a rise of US$8.34 billion in March, central bank data showed yesterday.
Economists polled by Reuters had forecast that reserves would drop about US$10 billion last month to US$3.133 trillion, with a stronger US dollar versus other currencies expected to depress the value of China’s dollar-denominated reserves.
The dollar index against other major currencies rose 2 percent last month.
Capital flight was seen as a major risk for China at the start of last year, but a combination of tighter capital controls and a faltering dollar helped the yuan stage a strong turnaround, bolstering confidence in the economy.
China’s reserves last year rose for the first time since 2014, and its cross-border capital flows went from net outflows to basically stable.
The escalating trade dispute between China and the US could hurt exporters on both sides and weigh on their economic growth, while adding to volatility in global financial markets.
However, the Chinese State Administration of Foreign Exchange last month said that any potential effects on its cross-border capital flows stemming from Sino-US trade frictions could be controlled.
The yuan last month lost about 1 percent against the resurgent greenback, but it is still up about 2.5 percent so far this year.
Chinese authorities have in recent weeks announced a series of moves which suggest that they are less worried about capital outflows, including allowing local investors to put more money into global financial markets.
At the same time, China has moved to give foreign investors more access to its equity, bond and commodity futures markets, which would help support the yuan and offer greater balance to cross-border flows.
The value of China’s gold reserves at the end of last month fell to US$77.788 billion, from US$78.419 billion at the end of March.
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