China’s foreign currency regulator said on Thursday that there is no concern amid signs of foreign exchange outflows as economic growth slows, adding that the recent decline in forex reserves was in line with Beijing’s policy goals, Reuters reports.
China is closely watching the impact of any changes in U.S. monetary policy, amid signs of higher volatility in cross-border flows, said Guan Tao, the head of China’s department of international payments at State Administration of Foreign Exchange (SAFE).
“The slowdown in growth of foreign exchange reserves will become a new normal and is in line with the direction of reforms,” he said.
“Capital inflows are swinging into outflows due to recent two-way fluctuations in the yuan exchange rate and the complex external and internal environment, which is normal … Such capital outflows are not risky,” Guan said during a news conference on Thursday, according to Reuters.
China’s foreign exchange reserves, which are largest in the world, fell around $100 billion in the third quarter to $3.89 trillion at the end of September, according to data from China’s Central Bank, the People’s Bank of China (PBOC).
China’s Central Bank, the PBOC, is gradually exiting from regularly intervening in the foreign exchange market, Guan said.
The Chinese government will further develop derivative instruments to assist firms in better hedging against the two-way volatility in the yuan exchange rate, Guan added.
In March, the PBOC, doubled the yuan’s daily trading band against the U.S. dollar in a bid to introduce two-way swings in the yuan.
On Tuesday, China reported that third quarter economic growth decreased to 7.3%, beating a market estimate of 7.2% and down from 7.5% growth seen in the second quart of this year. China’s third quarter economic growth was the rate since the 2008-2009 global financial crisis, which threatens the nation from missing its official annual growth target of 7.5% in 2014. This would be the first time in 15 years that China falls short of reaching its growth target.
Source: Reuters
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