Investment Outflow Reaches $95.6B in China

China’s central bank and financial institutions sold 628.98 billion yuan ($95.6 billion) of foreign exchange in December, according to a calculation by The Wall Street Journal based on central bank data Monday, as capital flows out of the world’s second-largest economy accelerated.

The December figure came after a net sale of 221.27 billion yuan of foreign currencies in November, indicating that outflow pressure increased as the domestic economy cools.

Also in December, China’s foreign-exchange reserves posted the biggest monthly drop on record, falling to their lowest level in nearly three years as the yuan further weakened against the U.S. dollar.

The banking system’s total forex-purchase position stood at 26.59 trillion yuan at the end of December, down from 27.21 trillion yuan at the end of November, the People’s Bank of China said. The data include purchases and sales by commercial banks and other financial institutions, but mostly reflect transactions by the central bank.

The figure is seen as a rough guide to changes in domestic liquidity conditions, but doesn’t indicate how much of the net inflows the central bank has sterilized through the issuance of central bank bills or other measures.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza