Aug. 14 (Bloomberg) -- China’s financial institutions sold a net 3.8 billion yuan ($600 million) of foreign currency in July, suggesting capital outflows after economic growth slowed to a three-year-low.
Yuan positions at financial institutions accumulated from foreign-exchange purchases stood at 25.658 trillion yuan at the end of July, down from 25.661 trillion yuan in June, People’s Bank of China data showed today.
The data help explain “tightness” in the interbank market and add to arguments for a cut in banks’ reserve requirements, said Dariusz Kowalczyk, a Hong Kong-based economist at Credit Agricole CIB. The central bank and foreign-exchange regulator played down risks of an exodus of funds after the country reported a record $71.4 billion capital-account deficit in the April-June period.
Today’s figures suggest the central bank may have intervened in support of the currency last month for the first time since April, which is “very unusual,” Kowalczyk said in a note today. “Re-acceleration of growth is needed” for Chinese companies to gain confidence in the outlook for the yuan and help the currency turn around, he said.
Any net capital inflows or outflows in the second half will be small, the PBOC said in a quarterly report released Aug. 2.
The yuan strengthened less than 0.1 percent today to 6.3586 in Shanghai. The currency has weakened about 1 percent this year.
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