China’s foreign-exchange reserves fell for a third month as the central bank kept the yuan steady against the dollar amid capital outflows and plunging stocks.
The reserves declined by $43 billion in July to $3.65 trillion, the least since August 2013, the People’s Bank of China said Friday. The holdings, which are more than triple the size of any other country’s, shrank in each of the last four quarters as the central bank bought yuan to stabilize the exchange rate. The currency’s closing levels in Shanghai this week have matched the tightest range recorded since a greenback peg ended a decade ago.
“The drop reflects the central bank’s intervention in the market to keep the yuan stable, as well as the continued capital outflows,” said Li Miaoxian, a Beijing-based economist at Bocom International Holdings Co.
China has been limiting yuan moves to encourage greater global use as it seeks to have it added to the International Monetary Fund’s reserve-currency basket at a review in November. A 28 percent slump in the Shanghai Composite Index of shares from a mid-June peak has boosted outflows and demand for the dollar.
This is the first time the PBOC has announced the foreign-reserves data on a monthly basis. The Chinese central bank, which used to release the figures each quarter, has adopted stricter IMF norms to improve data transparency as part of its reserve-currency bid.
The decline in the reserves also reflects the strength of greenback as China holds non-dollar assets in its foreign-exchange stockpile. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 peers, climbed 2.3 percent in July.