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China's Forex Reserves Show 1st Monthly Decline
 

China's foreign-exchange reserves witnessed their first monthly decline in March since last December, mainly due to losses in euro-denominated assets and short-term capital outflows, said analysts.

The world's largest foreign reserve holdings dropped by $4.69 billion from February to March, according to data released on Tuesday by the People's Bank of China, the central bank.

In the first three months, the holdings increased to $3.3 trillion from $3.18 trillion at the end of December, according to the central bank.

"The fall in reserves in March was probably due to losses in euro-denominated assets because the euro weakened against the US dollar," said Li Jie, director of the Foreign Reserves Research Center at the Central University of Finance and Economics.

And there might be more outflows of speculative capital, he said.

"Otherwise it would be hard to explain why the figure showed a decline, given that the trade surplus and investment inflows were both positive in March, and usually could ensure a stable investment earnings each month," Li said.

"And sudden expenditure in foreign reserves at that time is also impossible."

The trade surplus and foreign direct investment are the two major contributors to foreign exchange reserves.

In March, China reported a trade surplus of $5.35 billion, after registering a historic deficit of $31.48 billion in February. In addition, although foreign direct investment into China fell for a fifth consecutive month in March, it was still an inflow of $11.76 billion.

But Zhao Xijun, deputy head of the School of Finance at Renmin University of China, regarded temporary capital outflows as the biggest factor.


(China Daily.com.cn 2012-04-25)
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