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People's Daily Online>>China Business

China's foreign exchange reserves decreases

By Yang Xun (Beijing Daily)

15:53, January 17, 2012

Edited and Translated by People's Daily Online

China's foreign exchange reserves reached about 3.2 trillion U.S. dollars at the end of 2011, decreasing 20.6 billion U.S. dollars compared to the third quarter in 2011, according to data recently issued by the People's Bank of China.

China’s foreign exchange reserves have barely seen quarterly negative growth in recent years.

Insiders believe that this phenomenon is a sign of international capitals outflow and they suggest that the central Bank should lower the deposit-reserve ratio once again in the near future.

According to data, China's foreign exchange reserves increased by 72.1 billion U.S. dollars in October but decreased by 52.9 billion in November and 39.76 billion U.S. dollars in December last year.

According to statistics from the central bank, China's foreign exchange reserves have ever had monthly negative growths but rarely had a quarterly negative growth in recent years.

“The unexpectedly large negative growth of China's foreign exchange reserves in December of 2011 was mainly due to the increasing expectation of RMB depreciation and the capital outflows caused by the intensifying turbulence of the international financial market. And the pessimistic market expectation further affects the negative factors,” said E Yongjian, a researcher from the Financial Research Center under the Bank of Communications of China.

He also said that the pressure of capital outflows will still be large before the European debt crisis is solved. The RMB has appreciated much since China launched the exchange rate reform. Therefore, China still faces great pressure to depreciate the RMB.

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