China’s FX reserves continue to fall but at slower pace
Reserves dropped US$28.6 billion last month to US$3.2 trillion at the end of February, in a sign of stabilisation
The mainland’s foreign exchange reserves, increasingly a barometer of confidence in the economy, continued to fall in February, albeit at a slower pace.
The reserves fell US$28.6 billion last month to US$3.2 trillion, according to data released by the People’s Bank of China on Monday. That compared to a record drop of US$108 billion in December and a similarly deep fall of US$99 billion in January.
The data may prompt Beijing to declare capital outflows and market sentiment about the yuan are stabilising, which in turn could help ease fears of a hard landing for the world’s second-largest economy.
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Tao Dong, chief economist for non-Japan Asia at Credit Suisse in Hong Kong, said the worst was over in terms of capital outflows.
Tao said the sharp drops recorded in previous months were not necessarily a reflection of capital flight but were a result of companies shifting dollar debts into local currency ones.
The yuan rose to a three-week high on Monday after the central bank fixed the reference rate at the strongest level in two months and the US dollar fell against other currencies after weak economic data suggested another interest rate rise may not be around the corner.
Shanghai’s stock market index gained 0.8 per cent.