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Chinese Forex Reserves Goes Up To $3 Trillion against Expectations

March 8, 2017
Daisy Joseph
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China has been battling against capital outflow for some time now and its efforts have been rewarded. According to a recent report, the Chinese forex reserves has reached $3.005 trillion in February. This is the first time that the forex reserves has reached the $3 trillion mark since June 2016. The reserves increased by $6.9 billion, since January. In the previous month, experts predicted that the reserves will reduce by $20 billion. The gain in the forex reserves indicate that the efforts taken by the Chinese government to prevent capital outflow are working.

In an attempt to prevent a massive depreciation of the Chinese Yuan, the Chinese government used $1 trillion forex reserves. Now that the forex reserves have considerably increased, Beijing can take efforts to push the currency in the forex market. Beijing is focused on maintaining a stable global status of the currency, Chinese Yuan.

Previously, the restrictions on capital outflow have increased tension among international investors. The chairman of the European Union Chamber of Commerce in China, Joerg Wuttke commented that the restrictions could be adverse for the foreign businesses. He added that lower foreign reserves and weak economic growth is not good for the investors and they are willing to pull money out of China.

Despite the economic uncertainties in other parts of the world, China has successfully managed to increase the foreign reserves. This could propel the economy towards growth when the Chinese government makes decisions on balancing cross-border flows, without affecting the economy.