China’s foreign reserves have risen for the third consecutive month, with Chinese officials hailing a stabilisation in cross-border capital flows.
Data released by the People’s Bank of China over the weekend indicates that the country’s foreign reserve balance as of the end of April was USD$3.03 trillion, rising 0.68% or $20.445 billion compared to the preceding month.
An official from the State Administration of Foreign Exchange said non-US dollar currencies have risen in general against the greenback on international financial markets, and that asset prices have also made gains, driving an increase in PBOC’s foreign reserves.
SAF data indicates that cross-border capital flows continued to stabilise in April, and that there is now a basic balance in supply and demand for foreign exchange.
The SAFE official said that the RMB exchange rate would remain essentially stable as the global economy gradually improves and international financial markets, cross-border capital flows and exchange market supply all stay in an even keel.
Analysts from China Merchants Securities estimate that exchange rate conversion factors made a contribution of $15.2 billion to foreign exchange reserves, while data from the China Foreign Exchange Trading System indicates that the average yuan to USD exchange rate rose 86.74 points month-on-month in April to hit 6.8845.
China Merchants Securities further estimates that the strength of the US bond market made a further contribution of $18.4 billion to foreign estimates, with yields for 10 year maturities falling from 2.39% to 2.28%.
While the Federal Reserve is strongly expected to hike rates in June, the Renminbi is seen by analysts as remaining stable, and capital outflows from China are not considered a key factor impacting domestic funds.