China: Foreign reserves edge lower – ING

Iris Pang, economist at ING, points out that as per the latest figure from the Chinese central bank data, country’s foreign exchange reserves fell by $3.81 billion or 0.12% in April to $3.095 trillion.

Key Quotes

“The small drop was mainly driven by the strong dollar that rose 1.17% in the month. The strong dollar has put a lower valuation on non-dollar assets in dollar terms.”

“From the foreign exchange reserves data, it seems there were net outflows from China, but as we've explained, this was masked by the strong dollar.”

“There were inflows into China's bond market and the stock market in April. For example, offshore institutions increased their holdings in China bonds by CNY 76.25 billion in the month - an increase of 4% on a monthly basis according to Bond Connect.”

“If the trade war escalates, we expect the yuan to remain fairly stable.”