China’s foreign exchange reserves have fallen below $3 trillion for the first time in six years, the central bank announced Tuesday, crossing a symbolic threshold as authorities seek to stem capital flight out of the country.
Slowing growth in the world’s second-largest economy and a weakening Yuan have in recent months led investors to move huge sums offshore in search of better returns.
But authorities’ efforts to put the brakes on capital outflows by propping up the value of the Yuan, which is facing downward pressure from a strong dollar, have rapidly drained reserves.
China could also face more pressure if new US President Donald Trump follows through on pledges to take protectionist moves or stimulate the American economy, which are likely to further lift the greenback.
“With Chinese FX reserves having dropped below the psychologically important threshold of $ 3 trillion, this will further ramp up the pressure on Chinese policymakers,” Rajiv Biswas of IHS Global Insight said in a note.
China’s vast foreign exchange reserves slipped $ 12.3 billion to $ 2.998 trillion in January, data from the People’s Bank of China showed.
It was a larger decline than expected by a Bloomberg News survey of economists, and nearly a trillion dollars beneath its June 2014 peak. “This decline will likely spark renewed debate over how long the People’s Bank (PBOC) can continue intervening to support the renminbi,” Julian Evans-Pritchard of Capital Economics said in a note.
