Renminbi
China’s forex reserves continued to fall in December
Pressure on the renminbi continues as Chinese seek to get money out
of the country
© Bloomberg
JANUARY 7, 2017by: Charles Clover in Beijing and Jennifer Hughes in Hong Kong
China’s foreign exchange reserves continued to fall in December, albeit at a
slower rate than previous months, as the central bank announced a lower than
expected drop in foreign exchange reserves for the month.
Reserves fell by $41bn, to $3.01tn, less than the expected $51bn drop according
to a Reuters poll of analysts. In November reserves fell $70bn.
The lower than expected drop nonetheless showed that pressure on the
renminbi continues, as many Chinese seek to get money out of the country.
Like previous months’, December’s fall in reserves was mainly accounted for by
the central bank selling foreign currency to slow the renminbi’s decline,
which said that the central bank’s effort to stabilise the currency was the key
reason for the fall in reserves in 2016 from $3.3tn to just above $3tn.
Starting in November the Chinese government began to impose new capital
controls, including strict limits on large business deals abroad, in an effort to
close off an avenue widely used to get money out of China.
The controls have made life
complicated for many multinational
companies — even routine business
operations such as paying dividends
abroad have been subject to delays and
new scrutiny, according to a report by
the EU’s Chamber of Commerce in
China last month.
The continued capital outflow
heightens the possibility that the
Chinese government will either tighten
the screws further or make a one-off
devaluation to relieve pressure on the
currency next year.
The data come as investors debate the
renminbi’s likely direction after a
surprise two-day surge
(http://next.ft.com/content/dcd3e4fa-d313-11e6-b06b-680c49b4b4c0)
wrongfooted China bears betting on
further depreciation.
Last year, the offshore renminbi fell 5.8 per cent against the dollar while its
onshore cousin dropped 6.6 per cent, touching its lowest levels in eight years.
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Last week the offshore renminbi
jumped 2.6 per cent in two days — its
biggest-ever two day gain against the
dollar since it was introduced in 2010
— while the onshore rate reached its
highest level in more than a month.
The two ended Asian trading on Friday
at Rmb6.844 and Rmb6.924
respectively, up 1.9 per cent and 0.3
per cent on the week. The dollar’s lows
were Rmb6.7826 against the offshore
renminbi and Rmb6.8694 onshore
earlier on Friday.
The unexpected rally followed strong
economic data and further signs of
China’s efforts to curb capital outflows. Last week it imposed extra paperwork
on citizens planning to use their annual $50,000 foreign exchange limit.
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PBoC raises
renminbi’s daily fix
by most since 2005
(http://next.ft.com/content/c1630e5a-
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