China's forex reserves drop to near 4-yr lows as PBOC props up Yuan

Chinese central bank has been under pressure to sell dollars to support its Yuan currency.

China forex reserves rop
Chinese 100 yuan banknotes and a U.S. one dollar banknote are seen in this picture illustration in Beijing, China, January 21, 2016 Reuters

China's foreign exchange reserves fell by $99.5 billion in January, recording a third straight month of decline.

At $3.23 trillion, China's forex reserves are at the lowest level since May 2012, data from the People's Bank of China (PBOC) showed. However, China's forex reserves still remain the largest in the world.

Chinese central bank has been under pressure to sell dollars to support its Yuan currency, which has depreciated in the wake of an economic slowdown, expectations of higher interest rates in the US and a surprise devaluation staged by the PBOC in August.

China's foreign reserves declined by a total of $512.7 billion in 2015.

China's State Administration of Foreign Exchange has said the country still has sufficient forex reserves and is capable of withstanding the impact of cross-border capital flows.

Chinese regulators are expected to tighten capital controls and close loopholes to curb the flight of money.

"Monetary easing is highly needed amid economic slowdown, but the capital outflow will naturally tighten the monetary policy," Hao Zhou, senior emerging markets economist at Commerzbank in Singapore, told Reuters.

This article was first published on February 8, 2016
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