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China's forex reserves rise unexpectedly to $3.21 trillion

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Staff Writer | July 8, 2016
China's foreign exchange reserves increased $13.43 billion in June from the previous month to $3.21 trillion, central bank data showed.
China's forex reserves
Chinese economy   International capital may flow back to emerging markets
The rise in forex reserves last month showed that the foreign exchange market conditions were not as bad as people had imagined, said Guan Tao, researcher with the China Finance 40 Forum.

Chinese investment in foreign stocks and bonds had good yields, and Brexit did not bring panic to the market nor massive purchases of the U.S. dollar, Guan said.

International capital may flow back to emerging markets including China if the global forex market calms down with lower hedging demand, whereas the yuan will see greater fluctuation if market sentiment deteriorates, raising the pressure of capital outflow, Guan said.

China's reserves, the largest in the world, fell by $27.9 billion to $3.19 trillion U.S. in May, the lowest level in nearly five years.

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