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Tuesday, January 17, 2017, 09:49

China's yuan funds for foreign exchange keep dropping in Dec

By Xinhua
China's yuan funds for foreign exchange keep dropping in Dec
This file photo illustration taken on Sept 29, 2016 shows Chinese 100 yuan, 10 yuan and one yuan notes in Beijing. China said on December 29, 2016 it would almost double the number of foreign currencies it uses to determine the official value of the yuan, thereby diluting the role of the dollar. ( Fred DUFOUR / AFP)

BEIJING -- The central bank's yuan funds outstanding for foreign exchange declined again in December as capital outflow continued.

The funds declined 317.8 billion yuan (around US$46.1 billion) in December month on month to 21.94 trillion yuan, data from the People's Bank of China (PBOC) showed Monday.

The funds declined 317.8 billion yuan (around US$46.1 billion) in Dec month on month to 21.94 trillion yuan, data from the PBOC showed

December was the 14th consecutive month of decline.

As the Chinese currency is not freely convertible under the capital account, the central bank 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 of cross-border foreign capital flow and domestic yuan liquidity.

China's forex reserves fell for the sixth straight month in December by US$41.1 billion to 3.01 trillion dollars, as the PBOC used them to balance the forex market and currencies weakened against the dollar.

Despite recent drops, China is still home to the world's largest forex reserve and enjoys forex inflows from its trade surplus and foreign direct investment.

The central parity rate of the renminbi, or the yuan, strengthened 35 basis points to 6.8874 against the USD Monday, according to the China Foreign Exchange Trade System.

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