Forex level dips, but is seen as adequate

China's foreign exchange reserves dropped in January to $2.998 trillion, falling below the $3 trillion level for the first time since early 2011 and showing persistent capital outflow pressure.

Analysts expect the decline to slow within the next couple of months through Beijing's move to curb capital controls and the decline of seasonal factors.

The central parity rate of the yuan set by the central bank grew to 6.8604 against the dollar on Feb 7.

The offshore yuan retreated on Feb 7, soon after the data was released, trading at 6.8354 against the dollar as of 5:30 pm.

The State Administration of Foreign Exchange, the nation's top currency regulator, said the forex level remained adequate and that not too much should be read into the figure.

Xie Yaxuan, chief economist with China Merchants Securities, attributes the decline to the reset of the $50,000 annual foreign exchange quota in January, as well as rising demand for foreign exchange for overseas travel. An estimated $15 billion to $30 billion worth of foreign currency was purchased by individuals in January, according to Xie.

The latest steps by the central bank will help ease depreciation of the yuan and raise the cost of moving money out, according to Wang Youxin, an economist at the Institute of International Finance affiliated with Bank of China.

(China Daily European Weekly 02/10/2017 page15)