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People's Daily Online>>China Business

Banks' yuan positions declined in Oct

By Wang Xiaotian (China Daily)

09:38, November 22, 2011

The headquarters of the People's Bank of China in Beijing. Yuan positions are an indicator of the flow of "hot money", which Chinese regulators said they will crack down on by strengthening supervision of "abnormal" capital outflows. (Photo/China Daily)

Economists expect slowdown in appreciation, monetary loosening

BEIJING - Chinese banks' yuan positions for foreign exchange purchases fell for the first time in four years last month, sparking expectations of a slowdown in yuan appreciation and monetary loosening measures.

Yuan positions declined by 24.9 billion yuan ($3.9 billion) in October, according to data posted on the website of the People's Bank of China (PBOC), the central bank, on Monday.

Analysts usually see the yuan position as an indicator of "hot money" inflows or outflows.

"The capital outflows demonstrate that international investors are increasingly worried about the very likely slowdown of China's economic growth in the next year, the risks lying in lending to local governments through financial vehicles, and the gloomy capital market," said Zhuang Jian, senior economist at the Asian Development Bank.

In the third quarter, net inflows of foreign direct investment declined by 25 percent compared with the previous quarter to $35.9 billion, and the financial account surplus dropped by 65 percent, according to data from the State Administration of Foreign Exchange (SAFE).

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