China banks report net monthly forex selling in April
Published: 25 May at 11 AM
Chinese banks delivered a strong performance in April by selling more foreign currency than they purchased for clients, resulting in a net sale in foreign exchange of $3.7bn, revealed the State Administration of Foreign Exchange’s figures.
It was the first time this year that the banks have delivered net selling, although they did achieve net selling for clients last November and December. Over-the-counter foreign exchange transactions in China’s banks have contributed to the country’s huge reserves expansion over recent years and investors and exporters sold dollars to banks that, in turn, sell the majority of them in the interbank market to the central bank.
However, the financial crisis in Europe, the biggest trading partner for China, and the slowing economy domestically have hit foreign capital inflows, driving down the banks’ foreign purchases from customers.
In an indication of capital outflow, the country’s central bank and other commercial banks sold 60.6bn yuan in net foreign transactions in April, reversing March’s net purchases of 124.6bn, revealed the latest figures from the central bank, the People’s Bank of China.%
China’s foreign exchange reserves were at around 3.3 trillion by 31 March. Analysts predict that roughly two thirds of these are denominated in US dollars, a further 25 per cent in euros and the remainder in other instruments.