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China Forex Reserves Rise

In March, China’s central bank sold the smallest amount of foreign exchange since May 2016.In March, China’s central bank sold the smallest amount of foreign exchange since May 2016.

China’s forex reserves rose for the third month in a row in April, signaling eased capital flight pressure, central bank data showed Sunday. Forex reserves climbed to $3.0295 trillion at the end of April from $3.0091 trillion a month earlier, according to statistics from the People’s Bank of China.

This was the first time the reserves expanded for three months consecutively since June 2014. The country’s gold reserves also increased from $73.7 billion by the end of March to over $75 billion by the end of April, Xinhua reported.

The State Administration of Foreign Exchange predicted last month that the size of forex reserves would become more stable in the future as the economy maintains relatively fast growth and the country’s current account surplus stays in a reasonable range.

There had been growing concerns about capital flowing out of the Chinese market in the second half of 2016, when the economy was facing looming downward pressures and the Chinese yuan was in the middle of a losing streak against the US dollar.

In January, China’s forex reserves declined below the closely watched $3 trillion mark for the first time since February 2011.

However, concerns about capital outflows have receded lately, with the Chinese economy on a firmer footing, supported by a string of upbeat data including industrial profits, factory activity and fixed-asset investment.

In March, China’s central bank sold the smallest amount of foreign exchange since May 2016, supporting the government’s assertions that capital flows were becoming more balanced, Reuters reported.

Premier Li Keqiang said last month that market confidence in the yuan had significantly improved and the outside world had stable expectations for the yuan exchange rate.

The forex regulator said on Wednesday that China will improve macro-prudential management on cross-border flows to ward off potential risks and “optimize” diversification of foreign exchange reserves to serve China’s strategic goals.

China has tightened rules on moving capital outside the country in recent months as it seeks to support the yuan and stem a slide in its foreign exchange reserves. It burned through nearly $320 billion of reserves last year but the yuan still fell about 6.5% against the dollar, its biggest annual drop since 1994.

The Chinese currency is forecast to weaken to 7.07 against the dollar in a year, according to a Reuters poll of 60 foreign exchange strategists.

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