China's forex reserves sinks to six-year low

China's forex reserves, the highest in the world, fell below USD three trillion for the first time in six years, sparking global concerns over their rapid decline.
Forex reserves stood at about USD 2.99 trillion last month, down from about USD 3.01 trillion US dollars in December, the seventh monthly contraction, the State Administration of Foreign Exchange (SAFE) said today.
The SAFE attributed the decline to intervention to maintain equilibrium.
In addition, many Chinese people travel abroad during the Lunar New Year holiday, which fell in January this year, prompting higher demand for foreign exchange, state-run Xinhua news agency reported.

The persistent decline of China's forex reserves has caused widespread concern about the country's overall financial stability, as the diminishing stockpile, still the world's largest, is perceived as shielding the economy from currency and foreign trade volatility.
The USD 3 trillion safety mark was dismissed by the SAFE yesterday, describing the stockpile as "abundant".

The SAFE said it was "normal" for forex reserves to fluctuate in light of complicated domestic and overseas economic environments.
Last month astate-run think tank in a rare criticism accused central bank, the People's Bank of China (PBOC) of playing "dangerous game" of selling the reserves to defend weakening yuan.

"Forexreserves are valuable assets that (China) can use at critical times. It's a pity that they are being sold heavily in the market. It should be the last resort,"Zhang Ming, senior fellow at the Institute of World Economics and Politics under the state-run Chinese Academy of Social Sciences, said.
His criticism, which is rare in China's tightly controlled governing system came asforexreserves shrunk by almost a USD 1 trillion since June 2014 as the central bank has sought to prevent a large fall in the yuan against the USD.
The SAFE said the contraction was, at least, USD 87.2 billion less than last January and USD 28.8 billion less than in December.

The administration predicted that capital would flow in a balanced manner across the border in the near future.
"As China maintains medium-to-high economic growth, a current account surplus, sound fiscal conditions and a stable financial system, these factors will continue to support the yuan's position as a stable, strong currency.
It will also keep forex reserves at a reasonable and abundant level," it said.
The yuan weakened against the US dollar in 2016 as a strong US economic recovery and expectations of more US interest rate hikes supported the US currency.
To prevent the yuan from weakening too far and prompting more capital outflow, China's central bank sold a considerable amount of US dollars to prop up the yuan and tightened regulations.