China's Forex Funds Drop for 16th Straight Month, Rate of Decline Falls Considerably
Yicai Global
/SOURCE : Yicai
China's Forex Funds Drop for 16th Straight Month, Rate of Decline Falls Considerably

(Yicai Global) March 15 -- China's yuan funds outstanding for foreign exchange continued to fall last month but declines narrowed, according to data from the central bank.

Funds fell CNY58 billion (USD8.4 billion) to CNY21.7 trillion last month, the smallest decline since last May. Although China's forex funds have fallen for 16 consecutive months, the decline narrowed by CNY151 billion when compared to the CNY209 billion drop in January.

Since the central bank's official foreign reserves data are affected by a number of factors, such as interest income, forex funds are more reflective of the true conditions of capital outflows then forex reserves, insiders said. The slower decline in China's forex funds last month shows a slowdown in cross-border capital outflows and a more balanced supply and demand picture in the domestic foreign currency market.

Forex reserves rose USD6.9 billion from late January to USD3 trillion at the end of last month, data from the People's Bank of China shows. As the reserves increased, funds declined.

The yuan's central parity rate stayed at around 6.87 against the dollar, while the one-year dollar-yuan non-deliverable forwards fell to 7.1. The offshore yuan rate has been higher than the onshore rate for a number of trading days.

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