China’s foreign reserves hit $3tn following capital controls

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China’s foreign exchange reserves unexpectedly rose for the first time in eight months in February, rebounding above three trillion dollars as a regulatory crackdown and weakness in the dollar helped staunch capital outflows.

Reserves rose 6.92 billion dollars in February to total 3.005 trillion dollars, their first increase since June 2016, compared with a drop of 12.3 billion dollars in January, when reserves fell to 2.998 trillion dollars.

Economists polled by media had expected foreign exchange reserves to drop by 25 billion dollars to 2.973 trillion dollars in February.

China has tightened rules on moving capital outside the country in recent months as it seeks to support the yuan currency and stem a slide in its foreign exchange reserves.

It burned through nearly 320 billion dollars of reserves last year, but the yuan still fell 6.6 per cent against the dollar, its biggest annual drop since 1994.

The yuan has steadied in recent weeks as the dollar’s rally lost steam. The Chinese currency gained 0.2 per cent in February, and is up 0.8 per cent so far in 2017.

However, expectations of U.S. interest rate hikes beginning as early as next week have rekindled fears that the yuan could come under renewed pressure.

The prospect of the yuan depreciating could inflame trade tensions with the U.S. President Donald Trump’s administration.

China’s gold reserves rose to 74.376 billion dollars at the end of February from 71.292 billion dollars at end-January, data published on the People’s Bank of China website showed. (NAN)

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