China to keep for­eign ex­change re­serves sta­ble

China Daily - - FRONT PAGE - By CHEN JIA chen­[email protected]­nadaily.com.cn

Chi­nese for­eign ex­change re­serves rose by $8.6 bil­lion mon­thon-month in Novem­ber af­ter three months of de­clines, in­flu­enced in part by ris­ing bond prices in some ma­jor coun­tries, the cen­tral bank said on Fri­day.

By the end of last month, for­eign ex­change re­serves stood at $3.06 tril­lion, a net drop of $78 bil­lion since the end of 2017, the bank said.

Last month’s in­crease was a re­sult not only of the higher bond prices but also a strength­ened US dol­lar, Wang Chun­y­ing, a spokes­woman for the State Ad­min­is­tra­tion of For­eign Ex­change, said on Fri­day.

While there could be some fluc­tu­a­tions, China’s for­eign ex­change re­serves are ex­pected to re­main sta­ble, given the sound in­ter­na­tional bal­ance of pay­ments, Wang said.

A more flex­i­ble for­eign ex­change rate regime in China could help to keep re­serves sta­ble, an­a­lysts said.

In its lat­est sov­er­eign rat­ing re­port, Fitch Rat­ings said it ex­pects au­thor­i­ties to con­tinue fa­vor­ing flex­i­bil­ity and per­mit­ting more volatil­ity in the Chi­nese yuan, rather than us­ing the for­eign ex­change re­serve to off­set cur­rency weak­nesses.

“This would largely pre­serve China’s siz­able for­eign re­serve buf­fers,” the re­port said.

China may al­low more flex­i­ble float­ing of the cur­rency next year, as the mone­tary au­thor­ity has said it would push for­ward for­eign ex­change re­form, ex­perts said.

“Cross-bor­der cap­i­tal flows should be mon­i­tored by the Chi­nese mone­tary au­thor­ity next year to pre­vent un­ex­pected fluc­tu­a­tions, which have hap­pened in some emerg­ing mar­ket economies this year,” said Wang Shengzu, co-head of the In­vest­ment Strat­egy Group Asia at Gold­man Sachs Pri­vate Wealth Man­age­ment.

But pres­sure could also ac­cu­mu­late as the cur­rent-ac­count sur­plus may con­tinue to nar­row in 2019, ac­cord­ing to an­a­lysts, and there is po­ten­tial for higher cap­i­tal out­flows stem­ming from volatile mar­ket sen­ti­ment and fur­ther mone­tary pol­icy di­ver­gence with the United States.

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