CHINA’S foreign exchange reserves fell to US$3.20 trillion in July, central bank data showed yesterday, in line with analyst expectations.

    China’s reserves, the largest in the world, fell by US$4.10 billion in July. The reserves rose US$13.4 billion in June, rebounding from a five-year low in May.

    Net foreign exchange sales by the People’s Bank of China in June jumped to their highest in three months, as the central bank sought to shield the yuan from market volatility caused by Britain’s decision to leave the European Union.

    The reserves’ stabilization shows capital outflow pressures have eased because of a weaker U.S. dollar and the central bank doesn’t need to defend the yuan.

    “There was little significant intervention in July,” Zhou Hao, an economist at Commerzbank AG in Singapore, said before the report. “The central bank may have intervened days after the Brexit vote, but the intervention wasn’t significant enough to move the reserves.”

    China’s foreign exchange regulator recently said China would be able to keep cross-border capital flows steady given its relatively sound economic fundamentals, solid current account surplus and ample foreign exchange reserves.

    China’s foreign reserves fell by a record US$513 billion last year after it devalued the yuan currency in August, sparking a flood of capital outflows.

    The yuan has eased another 2 percent this year and is hovering near six-year lows, but official data suggest speculative capital flight is under control for now, thanks to tighter capital controls and currency trading regulations.

    After the yuan slipped to below the psychologically important 6.7/dollar level July 18, it has seen a mild rebound as the central bank stepped in to control the pace of its depreciation. (SD-Agencies)