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China's Dec forex reserves rise as yuan rebounds


CHINA'S foreign exchange (forex) reserves rose more than expected in December as the yuan rebounded after Washington and Beijing reached a partial trade deal.

China's forex reserves, the world's largest, rose US$12.3 billion in December to US$3.108 trillion, central bank data showed on Tuesday.

Economists polled by Reuters had expected China's reserves to rise by US$7.4 billion to US$3.103 trillion.

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The reserve increase in December was due to changes in currencies and the prices of international assets that China holds, the forex regulator said in a statement after the data release.

For 2019 as a whole, reserves climbed US$35.2 billion, which compared with a drop of US$67.2 billion in 2018, official data showed. China burned through US$1 trillion of reserves supporting the yuan during the previous economic downturn, which was marked by rapid capital flight and a surprising yuan devaluation in 2015.

Strict capital controls have helped China keep outflows under control over the past year, despite an escalating trade war with the US and weakening economic growth at home.

The country has also stepped up efforts to lure foreign investment in its bonds and stock markets.

In December, the yuan rose about 1 per cent against the dollar, but it still fell 1.5 per cent over the year.

The dollar fell 1.9 per cent in December against a basket of major currencies.

The People's Bank of China (PBOC) said in its 2020 work plan published on Sunday that it would let financial markets play a decisive role in deciding exchange rates, while reiterating that it would keep the yuan stable within a reasonable range.

Analysts say moves in the currency will continue to be driven largely by trade headlines, rather than expectations of more monetary policy easing.

Though details of the US-China "Phase One" trade deal are still sketchy, Washington says Beijing has agreed to refrain from competitive currency devaluations and to not target its exchange rate to gain an export advantage.

China plans to set a lower economic growth target of around 6 per cent in 2020 from 6-6.5 per cent in last year, relying on increased state infrastructure spending to ward off a sharper slowdown, policy sources said.

Growth cooled to 6 per cent in the third quarter last year, the slowest pace since the early 90s. REUTERS