China's FX Reserves Extend Run Of Rises
China’s foreign exchange reserves, a key measure closely watched by analysts, blew past all estimates to end 2017 higher than forecast.
For the full year, China’s reserves rose $US129.5 billion from $3US.011 trillion at the end of 2016 to $US3.14 trillion at the end of last year.
That was the first annual rise since 2014 and confirmation that the government crackdown on capital outflows had done the job.
These moves have included stopping some big offshore deals by Chinese companies, or forcing some of the country’s high profile businesses to call off big acquisitions or cu deb by selling assets.
Notching up the 11th straight month of gains, China’s reserves rose $US20.2 billion in December to $3.14 trillion, the highest since September 2016 and the biggest monthly increase since July.
That was double the $US10 billion rise in November. The overall rise go some help from the trade account.
The trade surplus for the January - November period was came in at $US380.24 billion, down from $US471.67 billion surplus in the same period of 2016.
Also helping in the boost was the turnaround in the value of the yuan which rose by 6.8% (against the US dollar) over 2017, more than offsetting the 6.5% slide in 2016 and reversing three straight years of depreciation.
China’s reserves however are still well below their all time peak of $US3.99 billion in June 2014.
The reserves pool fell by just on $US1 trillion from that peak to $US2.998 trillion in January 2017 as the government sought to support a weaker yuan by reducing destabilising capital outflows.
Reuters pointed out that the government is not relaxing the crackdown on capital movement offshore now that reserves have rebounded.
"Despite the improved capital flow picture, China’s State Administration of Foreign Exchange has continued a clampdown on the movements of funds abroad. The regulator announced last month it would cap overseas withdrawals by people using domestic Chinese bank cards starting this year,”Reuters reported.
“Some major global acquisitions by Chinese firms have also been put on ice by regulators, who fear they are really intended to disguise movements of capital offshore, though Beijing has maintained genuine investments will still be approved.”
The value of China’s gold reserves rose to $US76.47 billion at the end of December, from $75.833 billion at the end of November.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.