China’s foreign exchange reserves fell to their lowest level in 17 months as global impact of the coronavirus pandemic caused a plunge in global asset prices and a rise in the US dollar exchange rate, APA reports citing South China Morning Post.
Central bank data showed on Tuesday that China’s reserves – the world’s largest – fell US$46.085 billion in March to US$3.061 trillion. That was much worse than the expected drop of US$6.718 billion to $3.100 trillion, according to an economists poll by Reuters.
The fall was due to changes in prices of financial assets held by China, such as foreign bonds, and fluctuations in exchange rates, China’s State Administration of Foreign Exchange said in a statement after the data release.
A stronger US dollar leads to nominal depreciation of assets denominated in other currencies in China’s reserves portfolio.
Stock markets around the world crashed last month and investors scrambled for the safety of US dollar funding. Global markets are currently down 20 per cent from this year’s peak, while the yuan’s exchange rate has slipped by 1.7 per cent against the US dollar, compared to Singapore dollar’s 6 per cent drop and the Indonesian rupiah’s 15.4 per cent slump.
Outflows from Chinese stocks hit US$12.3 billion in March, according to the Institute of International Finance. However there are signs that outflows are starting to ease as China brings the outbreak under control and businesses and factories reopen after a two-month lockdown.
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