SAFE statistics shown forex reserves shrunk by US$12.3 bn in January 2017, to reach US$2.998 tn, the lowest level since 2011. This is the seventh straight month that forex reserves fell.
SAFE explained the decrease is caused by
- PBoC intervention in supplying foreign exchanges to maintain market equilibrium
- reset of the US$50,000 annual foreign exchange quota in January, as well as rising demand for foreign exchange for overseas travel
Reassuring the market, SAFE argues
- capital outflow had slowed; capital is expected to flow in a balanced manner across the border in the near future
- reserves remain abundant; it is unnecessary to fixate on the psychological threshold of US$3 tn
- the domestic economy is strong