China’s Foreign Reserves Slow Decline as Currency Stabilizes

China’s foreign-exchange reserves fell at a slower pace last month as the nation’s financial markets stabilized and policy makers took more steps toward shoring up growth.

The world’s largest currency hoard dropped by $28.6 billion to $3.2 trillion in February, the People’s Bank of China said in a statement Monday. That was the smallest decline since June and less than the $40.9 billion decrease expected by economists surveyed by Bloomberg, who had a median projection that reserves would fall to $3.19 trillion.

China’s yuan advanced in February against the dollar after three months of declines, and a domestic stock rout eased, helped in part by a move by policy makers to reassure that they will prevent a hard landing. Leaders gathering for the annual National People’s Congress say they’re targeting a wider fiscal gap for 2016 to help meet a slightly lower growth target.

“The government has shown clear policy signals to stabilize the currency,” said Xu Gao, chief economist at Everbright Securities Co. in Beijing. “This effectively curbed market expectations for further depreciation, and the market has gradually understood.”

http://www.bloomberg.com/news/articles/2016-03-07/china-s-foreign-reserves-slow-decline-as-currency-stabilizes

China foreign exchange data show capital outflow easing

China’s capital outflow eased in February, with analysts saying the smallest decline in foreign exchange reserves for eight months will reduce anxiety over the country’s financial stability.

Central bank data released on Monday showed reserves fell $29bn last month to $3.2tn, sharply lower than the $99bn fall in January and a record $108bn drop in December.

Expectations of renminbi depreciation and concern about China’s slowing economy have fuelled unprecedented capital outflow since the country’s official reserves hit an all-time high of $3.99tn in June 2014. As renminbi selling pressure intensified, the central bank has drawn on its reserves to curb downward pressure on the exchange rate. But the renminbi recovered 0.3 per cent in February, reducing the need for intervention.

“The capital flight thesis — the notion that Chinese residents and companies are desperate to get money out of the country and will do so regardless of short-term movements in the exchange rate — is inconsistent with the February outflow,” wrote Michael Parker, head of Asia Pacific strategy at Sanford Bernstein in Hong Kong, in a note.

Analysts have warned that China may eventually be forced to scale back its market interventions in support of the renminbi to prevent reserves being depleted below safe levels. On Sunday a top central banker sought to reassure investors that China’s official reserves were composed exclusively of highly liquid assets.

The comments by Yi Gang, deputy governor of the People’s Bank of China, were a response to claims by some bearish investors who believe the central bank figures include assets such as foreign real estate and private equity, which cannot easily be deployed in currency markets.

Zhang Yu, economist at Minsheng Securities in Beijing, estimates that the People’s Bank of China spent an average of $15bn a day in the spot exchange-rate market to support the renminbi in February, down from as much as $50bn per day at the height of renminbi panic selling following the surprise devaluation of the currency last August. Her estimates are for gross outflows from reserves and do not include countervailing inflows from trade and foreign direct investment.

http://www.ft.com/intl/cms/s/0/d8c4c668-e449-11e5-ac45-5c039e797d1c.html#axzz4258XlcsU

China’s FX reserves fall in February, outflows in focus

China’s foreign currency reserves fell for the fourth consecutive month in February, although the slower pace of decline suggests recent stability in currency markets eased pressure on the central bank to intervene aggressively

China’s reserves totaled $3.20 trillion at the end of February, dropping from $3.23 trillion the previous month and in line with Reuters expectations for $3.2 trillion, the People’s Bank of China (PBOC) announced on Monday.

The country’s foreign exchange reserves have come under close scrutiny in recent months for clues on the size of capital outflows as well as the ability of policymakers to support the yuan.

Julian Evans-Pritchard, an economist at Capital Economics, said in a note that the reserves data implied net capital outflows of $65 billion in February, compared with outflows worth $135 billion in January.

“The upshot is that the combination of tighter capital controls along with efforts by the PBOC to better communicate its intention not to devalue the renminbi seems to be bearing some fruit,” he said.

A big source of unease has been the yuan, or renminbi (RMB), as it’s known.

http://www.cnbc.com/2016/03/07/chinas-fx-reserves-fall-in-february-outflows-in-focus.html

China defends veracity of foreign exchange reserves data

China‘s official foreign exchange reserves only include highly liquid assets, a top central banker said on Sunday, seeking to reassure investors that authorities have enough ammunition to prevent a sharp fall in the renminbi.

Investor sentiment towards China’s currency has turned sharply negative since a surprise devaluation in August, amid unprecedented capital outflows and concern about the health of the economy. Concern over China’s currency policy sparked a global market sell-off early this year.

The People’s Bank of China has drawn on its foreign exchange reserves to curb renminbi weakness, but analysts believe the central bank may soon be forced to abandon this policy to prevent reserves dropping below dangerous levels.

Some bearish investors have also expressed skepticism about the reliability of China’s official foreign exchange reserves data, which showed reserves at $3.2tn at the end of January — still the world’s largest despite declining for 19 months.

http://www.cnbc.com/2016/03/06/china-defends-veracity-of-foreign-exchange-reserves-data.html

China Foreign-Exchange Reserves Fall at Slower Pace

China’s foreign-exchange reserves fell to the lowest level in more than four years in February, as the central bank continued to tap into its stockpile of foreign currencies to shore up the yuan.

But the reserves fell at a slower pace last month, helped by Beijing’s latest efforts to restore confidence in the yuan.

The People’s Bank of China said Monday that its foreign-exchange reserves fell by $28.57 billion from the previous month, to $3.202 trillion, following a decline of $99.5 billion in January. It marked the fourth consecutive monthly decline, with the reserves reaching their lowest level since December 2011.

“The smaller decline of foreign-exchange reserves is within market expectations as a stronger yuan helped cushion the outflow pressure,” said Zhang Fan, an economist with RHB Research.

In the past few months, Beijing used its pile of reserves, the largest in the world, to stabilize the yuan after the central bank unexpectedly devalued the currency on Aug. 11, a move it said was aimed at bringing its value more in line with market prices. The move triggered sharp selloffs of the currency as well as concern around China’s currency policies.

In an attempt to dispel such worries, PBOC Gov. Zhou Xiaochuan reiterated to global financial policy makers at a Group of 20 meeting late last month that China won’t engage in competitive devaluation of its currency to lift its exports, and that “there is no basis for persistent yuan depreciation from the perspective of economic fundamentals.”

Mr. Zhou and other central-bank officials have taken extensive steps recently to assure investors both at home and abroad that Beijing has the ability to shore up its currency and that the country’s reserves are abundant enough to help realize that goal.

http://www.wsj.com/articles/china-foreign-exchange-reserves-fell-at-slower-pace-1457347996