China Reserves Rise a Third Month on Tighter Capital Control

(Bloomberg) China’s foreign-exchange reserves rose for a third month in April, beating estimates, as tighter capital controls kept money from flowing out of the country and the yuan was stable.

Reserves climbed $20.45 billion to $3.03 trillion, the People’s Bank of China said Sunday, compared with a median estimate of $3.02 trillion in a Bloomberg survey of economists.

“April’s reserve increase reflects a combination of valuation effects, tighter capital controls and a more stable yuan,” Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing, wrote in a note. “At the start of the year, there were genuine concerns China faced another flood of capital outflows. That clearly hasn’t happened.”

The onshore yuan declined 0.2 percent against the dollar in April, the third month in a row in which it hasn’t moved by more than 0.22 percent. It has appreciated 0.6 percent against the greenback so far this year. A gauge of swings in the onshore yuan against the U.S. currency is at the lowest level since August 2015.


The State Administration of Foreign Exchange said on its website that more balanced capital flows and appreciation of other currencies against the U.S. dollar helped shore up the reserves in April.

China’s economic growth, steady exchange rate and balanced cross-border flows will keep the stockpile stable, it said. SAFE also said enterprises are purchasing foreign currencies more rationally.

Outflows are likely to ease notably this year as yuan depreciation expectations recede and the dollar remains stable, Eva Yi, an economist at China International Capital Corp. in Hong Kong, wrote in an April 24 note. The more ad hoc capital controls could be loosened or removed in the near future, she said.

Source: Bloomberg News