China SAFE December data: continued capital outflows as Yuan fell


China’s foreign exchange regulator commented earlier today that the country’s forex reserves were ample and it has plans to deal with cross-border capital flows, even as bank forex sales in December climbed to their highest in nearly a year.

According to Reuters, State Administration of Foreign Exchange (SAFE) spokeswoman Wang Chunying’s exact words were:

In the future, we believe China’s foreign exchange reserves have conditions to fluctuate up or down within a reasonable range.

China’s foreign currency reserves, by far the world’s largest, fell almost $330 billion in 2016 to end the year at just over $3 trillion as authorities struggled to stem capital outflows and shore up the yuan.
Chinese banks’ net sales of foreign currency rose in December to their highest since January 2016, indicating capital outflows remained strong as the yuan hit lows not seen in eight years.

Commercial banks’ net sales of foreign currency totalled $46.3 billion in December, compared with net sales of $33.4 billion in November, data showed. Net sales were $54.4 billion in January 2016.
For the January to December period, net forex sales stood at $337.7 billion, down from $465.9 billion net sales in 2015, SAFE said in a statement on its website.

When the pressure is big from inflows and when the pressure is big from outflows, we have a series of contingency plans… Even if we have plans, we will conduct prudent assessment before we implement them. SAFE is closely watching the impact from the U.S. Federal Reserve’s expected rate hikes and the dollar’s strengthening, added Wang.

China had also made two new records – over the six months through November shed $194.66 billion of Treasuries and over the previous 12 months, had sold $215.11 billion.

The yuan fell around 6.5% against the dollar in 2016, the biggest annual drop since 1994, and expectations for further weakening remain high in the face of a strong dollar.

 

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China SAFE December data: continued capital outflows as Yuan fell

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