China forex reserves drop by $320bn in 2016

BEIJING — China’s foreign exchange reserves fell by $320 billion last year, Beijing announced Saturday, as authorities sought to support the yuan against a soaring dollar which is encouraging capital outflows. The country’s vast foreign exchange reserves, the largest in the world, slipped to $3.011 trillion at the end of December, the State Administration of Foreign Exchange (SAFE) said on its website. In December the forex reserves dropped by $41 billion from the previous month, SAFE said, which would make it their sixth consecutive monthly decline according to figures from the central People’s Bank of China. Reserves had slipped by $46 billion in October and nearly $70 billion in November, falling to levels last seen more than five years ago. “The central bank’s efforts to stabilise the yuan are the main reason why the reserves have fallen,” last year, said an official of the State Administration of Foreign Exchange. The yuan is now trading at its lowest level in eight years against the dollar after dropping about seven percent in the space of a year, as Beijing sells greenbacks to support its currency. At the same time, a persistently sluggish domestic economy is encouraging a flight of funds in search of more remunerative investments abroad. Aware of the danger, China has tightened its measures to stop the outflow of capital, in particular by restricting many investments abroad considered doubtful. — AFP