China’s Foreign Reserves Extend Rising Streak Amid Capital Curbs

• January 07 2018

China’s foreign-exchange reserves posted an 11th straight monthly increase, capping a year of recovery amid tighter capital controls, a stronger yuan and resilient economic growth.

China’s foreign-exchange reserves posted an 11th straight monthly increase, capping a year of recovery amid tighter capital controls, a stronger yuan and resilient economic growth.

The reserves climbed $20.7 billion to $3.14 trillion in December, according to a People’s Bank of China statement on Sunday, compared with a $3.13 trillion median estimate in a Bloomberg survey.

The world’s largest foreign currency stockpile has been steadily rebounding since January, when it fell below $3 trillion for the first time in five years after the central bank propped up the yuan. The currency has come roaring back with authorities keeping a tight grip on money flowing out of the country and full-year economic growth set to pick up.

“The effective implementation of capital controls, most clearly shown in the crackdown on the activities of the corporate raiders, has greatly reduced the volume of external flows,” Michael Shaoul, chief executive officer of Marketfield Asset Management LLC in New York, wrote in a recent note.

Still, the prospect of higher U.S. interest rates and the reset of a $50,000 cap on how much foreign currency individuals can convert each year still could aggravate capital outflows.

The yuan strengthened 6.8 percent against the greenback last year. The U.S. currency weakened 8.5 percent versus leading peers, according to the Bloomberg Dollar Spot Index.

— With assistance by Yinan Zhao, Jeff Kearns, Xiaoqing Pi, Jasmine Ng, Hui Li, and John McCluskey