Forex re­serves de­cline by 2.2% in Novem­ber

Govt moves to rein in risks as­so­ci­ated with over­seas in­vest­ments in ho­tels, real es­tate

China Daily (Canada) - - VIEWS - ByWANG YANFEI yangyan­fei@chi­nadaily.com.cn

The re­cent strength­en­ing of the US dol­lar played a key role in the drop in China’s dol­lar-dom­i­nated forex re­serves last month, but cap­i­tal out­flow pres­sure will not per­sist for long be­cause mar­ket spec­u­la­tion is ex­pected to wane af­ter the US Fed­eral Re­serve makes its in­ter­est rate de­ci­sion, said an­a­lysts.

Of­fi­cial data onWed­nes­day showed that the for­eign ex­change re­serves fell by $69.1 bil­lion to $3.05 tril­lion in Novem­ber.

The monthly dol­lar-dom­i­nated re­serve drop came amid a strong US dol­lar rally, with a po­ten­tial in­ter­est rate hike in the United States ex­pected to come in the near fu­ture, ac­cord­ing to Yan Ling, an econ­o­mist with China Mer­chants Se­cu­ri­ties Co.

The yuan de­pre­ci­ated by 1.7 per­cent against the green­back in Novem­ber, dur­ing which the trad­ing vol­ume in the for­eign ex­change mar­ket in­creased for the third con­sec­u­tive month, upby 9.3 per­cent month-on-month.

“But the de­cline in forex re­serves is ex­pected to slow in De­cem­ber when the mar­ket is ex­pected to calm down af­ter the US de­ci­sion to raise its in­ter­est rate or not,” said Yan.

A string of mea­sures on strength­ened su­per­vi­sion for out­bound in­vest­ment rolled out by the cen­tral au­thor­i­ties aroused con­cerns over the govern­ment’s strong in­ten­tion to curb cap­i­tal out­flows.

Four top reg­u­la­tory bod­ies de­cided to tighten screen­ing of over­seas in­vest­ment projects ear­lier this month. The Na­tional De­vel­op­ment and Re­form Com­mis­sion and three other fi­nan­cial reg­u­la­tors on Tues­day said that China will rein in risks in out­bound in­vest­ment, tar­get­ing spec­u­la­tive be­hav­ior try­ing to move money out of China.

Four fields of in­vest­ment will be strictly mon­i­tored, in­clud­ing real es­tate and ho­tels, ac­cord­ing to a Xin­hua News Agency re­port.

Ivan Chuang, vice-pres­i­dent of Moody’s In­vestors Ser­vice Inc’s Asia-Pa­cific Re­gional Man­age­ment Group, re­garded stricter su­per­vi­sion as a nec­es­sary move as the na­tion steps up the open­ing of its econ­omy.

Chuang said that he did not see the ne­ces­sity for the govern­ment to con­trol only out­flows with­out reg­u­lat­ing in­flows.

“The govern­ment should be more will­ing to see bal­anced cap­i­tal flows,” he said.

“Although in­vestors’ ap­petites do be­come un­cer­tain as weaker yuan leads them to di­ver­sify their as­sets, it is un­der­stand­able to see the govern­ment tightening con­trol to fend off risks in out­bound in­vest­ment,” he added.

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