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China Forex  Reserves at  6-Year Low
China Forex  Reserves at  6-Year Low

China Forex Reserves at 6-Year Low

China Forex Reserves at 6-Year Low

China’s foreign currency reserves dropped below the $3 trillion level for the first time in nearly six years, data showed Tuesday, highlighting the challenges faced by Beijing in curbing capital outflows, EJInsight reported. According to figures released by the People’s Bank of China, the nation’s forex stockpile fell $12.31 billion last month to $2.998 trillion. The drop was larger than expected, complicating the central bank’s balancing act of trying to contain asset bubbles without triggering a liquidity crunch, the Wall Street Journal reports. China’s forex regulator played down significance of the reserves falling below the $3 trillion mark, insisting that the reserves remain ample and that they will continue providing support to the yuan. However, the Journal noted that the continued outflows are challenging the PBOC’s ability to juggle its conflicting goals of curbing bubbles and supporting growth. The central bank needs to tighten market liquidity to prevent excessive borrowing. But on the other hand, money leaving China means banks have less cash to lend, leading them to call for the central bank to pump in more liquidity.

 

 

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