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China sees more demand for foreign exchange in July

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Chinese banks' net foreign exchange sales surged nearly 150 per cent month-on-month in July, the government said on Tuesday, suggesting strong demand for hard currency as the country's yuan weakens.

[SHANGHAI] Chinese banks' net foreign exchange sales surged nearly 150 per cent month-on-month in July, the government said on Tuesday, suggesting strong demand for hard currency as the country's yuan weakens.

The banks sold US$143 billion worth of foreign exchange last month and bought US$111.3 billion, the State Administration of Foreign Exchange (Safe) said on its website, giving net sales total of US$31.7 billion.

In June net sales were just US$12.8 billion.

Funds have flowed out of China in recent months as its economy has slowed, adding to downward pressure on its currency and making yuan-denominated assets less attractive to hold.

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An unnamed Safe spokesman played down the July figures.

"In July cross-border capital flows fluctuated within the normal range," he said in a statement on the government agency's website.

Britain's vote to leave the European Union has heightened global uncertainty and prompted a flight to the US dollar, putting pressure on China's yuan.

China's foreign exchange reserves slipped fractionally to US$3.2 trillion in July, down US$4.1 billion from the previous month, according to the central bank.

Swift, the global provider of financial messaging services, said last month that the yuan's share of global payments slid to 1.72 per cent in June from 1.90 per cent in May.

But analysts say fears over a weaker yuan have eased since a year ago when China shocked the financial markets by devaluing the normally stable currency, guiding it down nearly five percent over a week.

AFP

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