China’s forex reserves, yuan on the up but slower growth ‘may lie ahead’
Former official warns currency’s rise in recent months may have been too fast
China’s foreign exchange reserves rose to a 10-month high at the end of August, suggesting Beijing has regained its grip on capital outflows.
The central bank released the August total of US$3.09 trillion on Thursday just hours after the onshore yuan exchange rate to the US dollar went below 6.5 in the afternoon trading session, the Chinese currency’s strongest level since May last year.
Beijing has been battling for nearly two years to defend the currency, which weakened to test seven against the US dollar late last year, and to preserve its forex reserves, which dropped below US$3 trillion in early 2017.
The yuan has quickly regained value and the reserves have steadily recovered this year, prompting speculation that Beijing will soon relax its controls of outbound payments and individual purchases of foreign currency.
At a forum in Beijing on Thursday, Guan Tao, a former State Administration and Foreign Exchange (SAFE) official and now an independent researcher, said the strengthening of the yuan in recent months might have been too fast.
“A major risk [for the yuan] is that the US Federal Reserve will start to reduce its balance sheet,” Guan said, adding that China’s economic growth could slow in the third quarter.
