Yuan funds for forex decline US$8.2b

June 15, 2016
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CHINA’S central bank saw its yuan funds outstanding for foreign exchange drop 53.7 billion yuan (US$8.2 billion) to 23.7 trillion yuan in May, data showed yesterday.

The fall was below the 54.4 billion yuan decline in April, suggesting less pressure of capital flight.

As the yuan is not freely convertible under the capital account, the People’s Bank of China has to purchase foreign currency generated by China’s trade surplus and foreign investment in the country, adding funds to the money market. Such funds are an important indicator for foreign capital flow in and out of China as well as domestic yuan liquidity.

Concerns about capital outflows had been on the rise as the economy slowed, and the Chinese currency had fallen since China revamped its forex mechanism last year.

Stability in international financial markets and positive signs in the domestic economy have reduced the pressure of capital outflow since the start of this year.

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