China’s forex reserves hit a seven-month high
Curbs on capital outflows and weaker US dollar sees reserves increase for a fourth straight month
China’s foreign exchange reserves jumped to a seven-month high at the end of May on curbed capital outflows and a weakened US dollar, giving Beijing ammunition to defend the yuan.
The reserves hit US$3.05 trillion at the end of May, up US$24 billion from a month earlier, the People’s Bank of China said on Wednesday. It was the fourth straight month they increased.
“China’s capital control measures have proven to be very effective,” said Zhou Hao, chief emerging markets economist at Commerzbank. “The authorities apparently hope to stabilise the foreign exchange market to help with the domestic agenda.”
The country tightened vetting of outbound direct investments and hard currency purchases by individuals at the end of last year, when its reserves fell below the US$3 trillion mark and the yuan weakened.
But Beijing hasn’t shown much willingness to relax capital account controls. The State Administration of Foreign Exchange now wants all overseas cash withdrawals and all transactions over 1,000 yuan (US$145) made abroad with a Chinese bank card to be reported from September.