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China Forex Reserves Fall Almost 100 Billion in January

China Forex Reserves Fall Almost $100 Billion in January

Feb. 7, 2016
Beijing sells dollars to stop the yuan from depreciating further.

BEIJING – China’s foreign exchange reserves have fallen to their lowest level in more than three years, the central bank said February 7.

The world’s largest currency hoard shrank by $99.5 billion in January to some $3.2 trillion, the People’s Bank of China said, the lowest since May 2012.

Worries about China's economy have pushed the yuan to a five-year low. The country saw its first-ever annual decline in foreign exchange reserves last year as Beijing tried to prevent a more drastic devaluation.

The PBoC is selling dollars to buy yuan amid a capital flight spurred by the slowing growth in the world's second largest economy.

But some analysts predict a more drastic weakening of the yuan this year and question China's ability to continue rapidly shedding the reserves.

"While the remaining reserves represent a substantial war chest, the rapid pace of depletion in recent months is simply unsustainable," IHS Global Insight economist Rajiv Biswas told Bloomberg News.

Outflows increased "as expectations mount that the PBoC will eventually be forced to capitulate once its reserves are sufficiently depleted," he added.

The pace of decline in the reserves in January was slower than December, which at some $108 billion was the largest monthly drop on record.

China has also tightened some capital controls to try to curb outflows.

China has set its growth target for this year at between 6.5%-7%, the top economic planner said Wednesday, an acknowledgement that expansion -- already at its slowest pace in 25 years -- will continue to weaken.

Global investors are closely watching the slowdown in the world's second largest economy, which has created turbulence in world markets. 

Copyright Agence France-Presse, 2016

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