BEIJING: China’s foreign exchange reserves have fallen below US$3 trillion for the first time in six years, the central bank announced Tuesday, crossing a symbolic threshold as authorities seek to stem capital flight out of the country.
Slowing growth in the world’s second-largest economy and a weakening yuan have in recent months led investors to move huge sums offshore in search of better returns. But authorities’ efforts to put the brakes on capital outflows by propping up the value of the yuan, which is facing downward pressure from a strong dollar, have rapidly drained reserves.
China could also face more pressure if new US President Donald Trump follows through on pledges to take protectionist moves or stimulate the American economy, which are likely to further lift the greenback.
“With Chinese FX reserves having dropped below the psychologically important threshold of US$3 trillion, this will further ramp up the pressure on Chinese policymakers,” Rajiv Biswas of IHS Global Insight said in a note.
