China’s foreign exchange reserves, the largest in the world, rose for the 11th month in a row to $3.14 trillion at the end of December, data by country’s central bank showed today. This marked the highest level since September 2016, the People’s Bank of China said. The reserves gained $20.7 billion dollars from a month earlier, faster than the market forecast, which estimated the reserves to stand at $3.13 trillion, official media said. In the last few decades, China has accumulated the largest forex reserves across globe from its vast exports as it emerged the world’s factory. Concerns rose in 2016 when the forex reserves fell below the $3 trillion mark for the first time, amid allegations of large capital outflows. China’s State Administration of Foreign Exchange (SAFE) attributed the continued increase to stronger non-dollar denominated currencies and higher asset prices, while cross-border capital flows and transactions remained stable.
The accumulation of forex reserves was attributed to stabilisation of Chinese currency Yuan last year. The yuan rose for 11 months in a row, a sharp contrast to a year-ago situation when it fell to nearly $7. It traded at 6.49 per US dollar on Friday. “The yuan is without a doubt the biggest surprise of last year,” Larry Hu, chief Greater China economist of Macquarie Securities said.
“The rise of the yuan is due to many factors, but the combination of capital controls and the $1.5 trillion-plus goods trade surplus accumulated in 2015-2017 could have played the most important role,” Hu was quoted as saying by the Hong Kong-based South China Morning Post. The value of the country’s gold reserves rose to $76.47 billion at the end of December, up from $75.83 billion a month earlier, according to the People’s Bank of China.