China’s forex reserves rise once again
CHINA’S foreign exchange reserves rose for the second consecutive month in December to $3.07 trillion, generally maintaining stability amid increased fluctuations in global financial markets, according to data issued by the country’s foreign exchange regulator on Monday.
The foreign reserves by the end of last year, however, slightly decreased from $3.14 trillion by the end of 2017, mainly due to a five per cent depreciation of the yuan against the US dollar last year. But the amount is still the world’s largest.
In December, the reserve increased by $11 billion, after a rise of $8.6 billion in November, reported the State Administration of Foreign Exchange (SAFE).
SAFE attributed the foreign exchange reserve increase to the appreciation of nondollar currencies and increases in the prices of major countries’ bonds held by China.
“China’s foreign exchange reserve is expected to remain generally stable in 2019, due to the sound economic growth momentum in the long run. It is able to trade off external shocks and market fluctuations, and maintain cross-border capital flow stability,” said SAFE spokeswoman Wang Chunying.
China Minsheng Bank chief researcher Wen Bin said as China’s economic growth is forecast to stabilise “within a reasonable range”, the market has appreciation expectations on the yuan, while the greenback may weaken after the US Federal Reserve announced the last rate hike last year.
SAFE also disclosed that the country’s gold reserves on Monday, which stood at $76.33 billion at the year-end of last year, were up by $4.21 billion from November. The gold reserves volume increased to 59.56 million fine troy ounces in December, the first rise since October 2016.
More economic indicators will be released later this week, including inflation gauges and financial statistics, such as money supply and credit growth.
Economists forecast stable economic growth in the last quarter of last year, with a likely GDP growth rate of 6.5 per cent, unchanged from that in the third quarter.
Inflation may moderate in the fourth quarter of last year, due to the slight weakness of industrial profits and lower oil prices. But the broad credit growth may rise because of the government’s encouragement of borrowing to support the economy, said a Goldman Sachs research note.
Instead of using foreign exchange reserves to maintain a stable currency, the authorities could manage market expectations of the yuan’s value using various tools, although yuan depreciation pressure may increase if monetary policy is further eased, it said.
China’s central bank, the People’s Bank of China, announced a cut in the reserve requirement ratio by one per cent on Friday, freeing up $116 billion capital for lending.