China’s forex reserves fall US$9 billion in November on lower valuation of assets
- Despite dip, China’s foreign exchange reserves have been generally rising since end of last year as foreign investors snap up stocks and bonds
- China’s gold reserves fall to US$91.47 billion at end of November from US$94.65 billion a month earlier
China’s foreign exchange reserves fell by US$9 billion in November to US$3.096 trillion, the central bank said on Saturday, as Washington and Beijing remained locked in negotiations over an interim trade agreement.
Analysts polled by Reuters had expected China’s reserves, the world’s largest, to fall by just US$4 billion in the month.
Despite a slowing economy and an escalating trade war, China’s foreign exchange reserves have been gradually rising since late last year, helped by tight capital controls and rising inflows from foreign investors who are snapping up the country’s stocks and bonds.
Modest changes in reserve levels in recent months have been largely ascribed to fluctuations in global exchange rates and the value of assets that China holds, such as foreign bonds.
After sliding sharply this summer as the dispute suddenly escalated, the yuan rose for three straight months through November on hopes of a trade truce, only to fall back again in early December as tensions between Washington and Beijing flared. Fresh US tariffs on Chinese goods are set to take effect on December 15.
The yuan gained 0.12 per cent against the dollar in November, but remains about 2.3 per cent weaker for the year to date.
The dollar, meanwhile, rose about 1 per cent against a basket of other major currencies last month.
The value of China’s gold reserves fell to US$91.47 billion at the end of November from US$94.65 billion at the end of October.
China held 62.64 million fine troy ounces of gold at the end of last month, unchanged from October.
The country’s economic growth cooled to 6 per cent in the third quarter, its slowest pace in nearly 30 years, and many economists believe it will slow further in 2020.
Still, analysts say capital outflows have been modest compared with the last economic downturn in 2015-16, when policymakers burned through about US$1 trillion in reserves supporting the yuan.
China’s central bank has started to slowly trim interest rates in recent months, and more reductions are expected in the coming quarters to avert a sharper slowdown.
But analysts believe the cuts are likely to be more gradual and smaller than those in 2015. If so, moves in the yuan are likely to be influenced more by trade developments than policy easing.