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China's Forex Reserves Fall by $8.23 Billion Due to Dollar Appreciation

According to China's State Administration of Foreign Exchange (SAFE) Foreign exchange reserves fell by 0.26 per cent in August after a two-month gaining streak in June and July.


Updated:September 9, 2018, 6:56 PM IST
China's Forex Reserves Fall by $8.23 Billion Due to Dollar Appreciation
Representative image. (Reuters)
Beijing: China's foreign exchange reserves, the highest in the world, fell by $8.23 billion in August as a result of an appreciating US dollar and now stand at the lowest since October last year, experts said Sunday.

Foreign exchange reserves fell by 0.26 per cent in August after a two-month gaining streak in June and July, China's State Administration of Foreign Exchange (SAFE) said in statement.

"The fall in reserves is due to a 0.6 per cent appreciation of the US dollar," Guan Tao, a former senior SAFE official, told state-run Global Times on Sunday, adding that the numbers fell within a normal volatility range.

"Exchange rates naturally rise and fall - the figures don't warrant any need for central bank intervention," said Guan.

The total reserves now stand at $3.10972 trillion, the lowest level since October 2017.

The value of China's 59.24 million ounces of gold bullion reserves also fell to USD 71.228 billion, due to the yellow metal's depreciation.

Xu Hongcai, deputy chief economist at the China Centre for International Economic Exchanges, agrees with the diagnosis, pointing out that the strength of China's external trade in August backs up stable foreign exchange reserves.

"Around one-third of China's foreign exchange reserves are kept in euros, but the official figures are given in the equivalent in US dollars. As the euro has depreciated against the US dollar, the total foreign exchange reserves have gone down in value," Xu said.

"In nominal terms, China's reserves must have actually increased at the end of August. Exports were strong and we had a current account surplus," said Xu, adding that China also recorded a surplus in its August capital account, without any large-scale capital outflows.

Another SAFE official told state-run Xinhua News Agency on Saturday that political and economic risks have been increasing around the world this year, with many emerging markets suffering economic damage amid increased market volatility.

However, China's foreign exchange reserves have remained stable due to the nation's continued stable growth and the increased flexibility of the yuan's exchange rate.
| Edited by: Naqshib Nisar
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