China's foreign exchange reserves fall US$43.3b in Sept as central bank steps up yuan support

[BEIJING] China's foreign exchange reserves shrank by US$43.3 billion in September as the central bank stepped up intervention to stabilise the yuan and calm sentiment after a surprise devaluation of its currency had jolted global markets.

China's reserves, the world's largest, dropped to US$3.514 trillion last month, central bank data showed on Wednesday, after a record slide of US$93.9 billion in August.

The devaluation of the yuan on Aug 11, and the consequent fall in reserves have raised questions about how sustainable China's efforts to support the yuan are, as capital trickles out of the country due to fears of a deepening economic slowdown and prospects of rising US interest rates.

Analysts expect the reserves to fall further.

"The decline in China's foreign reserves, while less than market expected, still shows that China's central bank continued the market intervention in the past month," said Singapore-based Zhou Hao, senior economist in Asia at Commerzbank. "As PBoC also intervened into the forward market in the past month, the foreign reserves will likely plunge again when these forward contracts mature," he said.

Policy makers have been keen to calm sentiment after a summer rout in stocks, the yuan devaluation and a series of clumsy attempts by authorities to stabilise equities spread turmoil in global financial markets.

Beijing is also pressing on with attempts to ease concerns about a cooling economy, which is growing at its slowest pace in decades.

The yuan devaluation had sparked worries of a global currency war and raised doubts about Beijing's ability to manage an economy transitioning from an investment- and exports-led model to one driven by domestic demand.

The value of China's gold reserves stood at US$61.2 billion at the end of September, down from US$61.8 billion at the end of August, the People's Bank of China said on its website.

China's International Monetary Fund (IMF) reserve position stood at US$4.69 billion, down from US$4.73 billion the previous month. It held US$10.47 billion of IMF Special Drawing Rights at the end of last month, down from US$10.53 billion at the end of August.

The central bank in July shifted to reporting its foreign exchange reserves on a monthly basis after adopting the IMF's Special Data Dissemination Standard (SDDS). The bank had previously released the data on a quarterly basis.

REUTERS