China sheds US treasuries holdings in September
China's holdings of US Treasury securities dropped for the first time in eight months in September, but remained the largest holder of US treasuries.
China cut its US treasuries holdings by $19.7 billion in September, with the total holdings down to $1.18 trillion, the latest data from the US Treasury Department showed on Wednesday.
Japan also reduced its US treasuries holdings by $5.7 billion to $1.096 trillion in the month and remained the second largest US treasuries holder.
By the end of September, overall foreign holdings of US Treasury securities rose to $ 6.3235 trillion from August's $6.2698 trillion.
As Chinese economy is gaining steady growth momentum, the crossborder capital flows in China remain stable in the short term, which has supported the steady increases in the country's foreign exchange reserves.
By the end of October, China's forex reserves rose $700 million to $3.1 trillion, rising for nine consecutive months.
Meanwhile, China's central bank conducted net cash injections into the market for the fourth straight day on Thursday to ease liquidity strain.
The People's Bank of China (PBOC) conducted 330 billion yuan ($50billion) of reverse repos Thursday, pumping a net 310 billion yuan into the market as 20 billion yuan of reverse repos matured.
Reverse repo is a process by which the central bank purchases securities from commercial banks through bidding with an agreement to sell them back in the future. Thursday's operation came after a net injection of 150 billion yuan Monday, 140 billion yuan Tuesday and 220 billion yuan Wednesday, as matur- ing reverse repos and tax payments put pressure on liquidity near the end of the year.
Meanwhile, China's top banking regulator has called on China Development Bank Corp and the Export-Import Bank of China to step up management of country risks, compliance risks and overseas lending risks, while they support Chinese companies expanding their business globally.
On Wednesday, the China Banking Regulatory Commission issued regulations for three State- owned policy banks, CDB, China Exim- Bank and Agricultural Development Bank of China. Among them, CDB currently has six representative offices overseas, and China EximBank had three representative offices abroad, plus a branch in Paris, by the end of last year.
Zhou Minyuan, head of CBRC's policy banks supervision department, said at a news conference on Wednesday: "The CBRC required both banks to fully identify overseas business risks, step up compliance management, completely understand the operational and financial status of their clients as well as the laws and regulations of host countries, strictly observe the local environmental and industrial regulations, and strengthen communication with local regulators."
The CBRC demanded the banks enhance capital supervision via on-site inspections and investigations, effectively prevent and control overseas business risks by taking risk-sharing measures, prudentially evaluate the feasibility and compliance of relevant guarantee measures, and improve their emergency response mechanism.
"These banks should set clear goals and plans for development and determine their priority areas of service based on self-positioning," Zhou said.
Regulators will also set requirements on capital adequacy ratios for the three policy banks by taking reference of the requirements on commercial banks, said Xu Qinghong, deputy head of CBRC's policy banks supervision department.
"The banks need to establish their own capital management system, workflow and policies, to ensure that they can combat various risks with their own capital, and make a medium- to long-term capital plan," Xu said.
The CBRC required the banks to have an internal evaluation of capital at least once a year and build a sustainable capital replenishment mechanism.
The latest regulations are part of the CBRC's efforts to implement the central government's directive on the prevention and control of financial risks, said Hu Bin, deputy director- general of the Institute of Finance and Banking at the Chinese Academy of Social Sciences.
"The CBRC is trying to stop the transfer of problems associated with the real economy to financial institutions, prevent the Chinese banking sector from being significantly affected by external economic and political shocks, and take precautions to help policy banks avoid huge fines imposed by host countries' regulators for compliance issues."
He advised policy banks to make internal control policies and risk management strategies according to different countries and regions, different categories of business, and different types of risk while helping Chinese companies expand business in the economies related to the Belt and Road Initiative.
The total assets of the three policy banks amounted to 25.12 trillion yuan ($ 3.79 trillion) by the end of September, according to CBRC statistics. The banks extended loans of 1.42 trillion yuan to projects related to the Belt and Road Initiative and 2.36 trillion yuan to support Chinese companies going global.