PBOC May Have Shifted Cash to Wealth Funds, China Merchants Says

China’s central bank may have added billions of dollars to the country’s sovereign wealth fund, China Merchants Securities said after analyzing official data from last month.

The People’s Bank of China may have injected funds into China Investment Corp. or “have taken similar actions” to cause a big drop in its yuan positions last month, said Xie Yaxuan, an analyst at the brokerage, who used to work for the foreign-exchange regulator.

Xie is seeking to explain “conflicting” data. The central bank’s figures show it sold a net 73.6 billion yuan ($11.8 billion) of foreign currency in November, which would mean the amount of dollars flowing into the PBOC has fallen. Other indicators, the including trade surplus, inbound investment and over-the-counter foreign exchange deals between commercial banks and their clients, point to the opposite.

“It’s a guess and there’s no hard evidence to prove that,” said Xie, who has been following China’s capital flows. “But it’s the only reasonable fact that I can think of to explain the published data.”

The PBOC’s news department didn’t reply to a faxed question regarding the issue. Calls to CIC’s public relations office went unanswered. CIC, set up at the end of 2007 to improve returns on China’s foreign exchange reserves by investing overseas, has been applying for funds from the central bank. It received $30 billion from the PBOC in 2011, which came to light in March 2012.

CIC has to apply for fresh funds from the State Administration of Foreign Exchange when it runs short of cash, CIC Executive Vice President Jesse Wang said in March.

— With assistance by Xin Zhou

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