Business

China's forex reserves fall below 
US$3 trillion for first time in 6 years

BEIJING: China's foreign exchange reserves unexpectedly fell below the closely watched US$3 trillion (S$4.3 trillion) level last month for the first time in nearly six years, though tighter regulatory curbs seemed to be making progress in slowing capital outflows.

China has taken steps in recent months to make it harder to move money out of the country and reassert a firmer grip on its faltering currency, even as US President Donald Trump steps up accusations that Beijing is keeping the yuan too cheap.

Reserves fell US$12.3 billion in January to US$2.998 trillion, more than the US$10.5 billion that economists polled by Reuters had expected.

While the US$3 trillion mark is not seen as a firm "line in the sand" for Beijing, concerns are swirling over the speed at which the country is depleting its reserves and how much longer it can afford to defend the currency.

Some analysts fear a heavy and sustained drain on reserves could prompt Beijing to devalue the yuan as it did in 2015, which would sow turmoil in global markets and likely stoke political tensions with the new US administration.

To be sure, the January decline was much smaller than the US$41 billion reported last December and was the smallest in seven months, indicating China's renewed crackdown on outflows appeared to be working, at least for now.

Economists expect more forceful tightening of regulatory controls, though China's financial system is notoriously porous, with speculators able to find new channels to get funds out of the country.

While the world's second-largest economy still has the largest stash of forex reserves by far, it has burned through more than half a trillion dollars since August 2015. - REUTERS

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