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Funds outstanding for foreign exchange decline

(Global Times)

13:44, September 19, 2012

China's central bank disclosed Tuesday that the country's funds outstanding for foreign exchange continued to drop in August, indicating increasing capital outflows.

By the end of last month, China's total yuan funds outstanding for foreign exchange stood at 25.64 trillion yuan ($4.06 trillion), a decline of 17.4 billion yuan over the previous month, according to statistics released by the People's Bank of China (PBC).

In July, the figure decreased by 3.82 billion yuan.

Yuan funds outstanding for foreign exchange is the money the PBC pays financial institutions, including commercial banks, each month in exchange for the foreign currency they receive from trade surpluses, foreign investments and other sources.

The decline in August means financial institutions sold 17.4 billion yuan worth of foreign currency, spurred by increasing expectations for yuan depreciation and intensified concerns over the growth of the world's second largest economy.

Because the yuan remains inconvertible under the capital account, foreign capital that enters China in most cases will be sold to the central bank. Therefore, the decline of the yuan funds outstanding for foreign exchange also reflects capital outflow from the country.

During the second quarter, the yuan weakened 0.88 percent against the US dollar.

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