China’s forex reserves keep up growth spurt, expanding room for reform
Weaker US dollar and domestic rebalancing push total up but questions remain over prospects for economic growth in the second half, analyst says
China’s foreign exchange reserves rose for the third month in a row in April, staying above the psychologically important US$3 trillion mark and giving the leadership more room to move on tough domestic issues such as structural reform.
The reserves grew by US$20 billion from a month earlier to end April on US$3.03 trillion, due a better balance in the domestic forex market and a rise in the value of non-US dollar assets in the country’s portfolio, the State Administration of Foreign Exchange (SAFE) said on Sunday.
China Merchants Securities analyst Yan Ling said US bonds alone contributed US$18.4 billion to the forex increase.
“The US dollar index is likely to remain weak and this will be good for expectations for the yuan exchange rate,” Yan said.
Bank of Communications analyst Liu Jian said a fall in the US dollar index and a more stable mainland economy eased expectations of further falls in the yuan and slowed capital outflows.
“Capital outflows will become more challenging in the second half when the uncertainties of China’s economic growth increase and the US Federal Reserve continues to raise interest rates.” Liu said. “However, it’s basically controllable.”