Weak dollar, tight capital controls push reserves up by US$24 billion
World's largest stockpile of foreign reserves grows even bigger, rising for a fourth straight month
China’s foreign reserves rose at the fastest pace in four months to US$3.054 trillion as of May 31, ahead of expectations and giving further assurances that the pressure of cross-border capital flight from the country eased further into the second quarter.
The world’s largest foreign exchange stockpile edged up by US$24.03 billion in May, the largest monthly increase since the reserves began rebounding in February.
During April, the tally rose by US$20.44 billion. That puts the total amount of gain since January at US$55.4 billion, when it hit a recent low below the crucial US$3 trillion.
Analysts polled by Bloomberg have predicted the foreign reserves to rise by US$16.5 billion to US$3.046 trillion.
“Effects of greater financial market liberalization have helped to stabilize the size of foreign exchange reserves,” said the State Administration of Foreign Exchange (Safe) following the release of data.
“Due to broadly higher global currencies against the US dollar, valuation of non-dollar denominated assets rose somewhat, helping to drive May’s rise in forex reserves,” the country’s foreign exchange regulator elaborated.
Despite the recent success in staving off Chinese demand to move assets abroad, Beijing is not loosening its belt on controls and is keeping any windows shut on siphoning money offshore, including those done through bank cards.
In particular, banks in China have been ordered to collect information on people’s overseas transactions over 1,000 yuan from September 1 this year.
The yuan rose 0.1% against the US dollar in May to 6.818 from a month ago.
A rally in the onshore yuan had been sparked earlier on Monday, when the People’s Bank of China set the daily fixing rate below the 6.8 mark, with analysts predicting the yuan will maintain its strengthening momentum in the near future.