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China Seeks To Dismiss Market Concerns On Falling FX Reserves

The foreign exchange regulator in China has clarified that the country has ample foreign exchange reserves for its needs and said any fluctuations in its levels were normal. A spokesperson for State Administration of Foreign Exchange (SAFE) Wang Chunying said that existing reserves were sufficient to handle movements within a reasonable range.

The remarks came amid concerns regarding the rapidly increasing outflows in the country’s reserves.

Reserves dropped for the sixth consecutive month in December reaching about $3.01 trillion.

During 2016 China’s foreign exchange reserves fell by $319.84 billion. The steady decline in foreign reserves along with the fact that it is now close to the $3 trillion psychological mark has left the market concerned. However Wang dismissed such worries and said that excessive hype should not be built over a certain number adding that the regulator had several plans in place to handle any eventuality.

In a statement, Wang Chunying said,

It is normal to see upward or downward fluctuations in any financial indicator. When the pressure is big from inflows and when the pressure is big from outflows, we have a series of contingency plans… Even if we have plans, we will conduct prudent assessment before we implement them

China saw net foreign currency sales of $46.3 billion in December versus the $33.4 billion seen in November. In January, net sales was at $54.4 billion. For the entirety of 2016, the net sales in foreign exchange was $337.7 billion, a significant drop from the 465.9 billion sales in 2015, according to SAFE.

The rate of China selling U.S. Treasuries in 2016 has however been unprecedented. For the six months leading to November, China had sold treasuries worth a total of $194.66 billion while in the previous 12 months, it had sold just $215.11 billion. The fall in China’s U.S. Treasury debt holdings


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