China Claims Relatively Abundant Forex Reserves Despite Crash

January 13, 2016
China Claims Relatively Abundant Forex Reserves Despite Crash August 17, 2018 Clive Nelson

ChinaIn December 2015, China found its mammoth foreign reserves considered to be the world’s largest, dip to a three year low amounting to $3.3 trillion. Beijing maintained that the $107.9 billion deficit was in part a result of the recent US hike in interest rates, and went on to reassure the public that the country still had “relatively abundant” reserves.

The State Administration of Foreign Exchange (SAFE) recently announced that the country still possessed a strong accumulation of foreign exchanges reserves to the tune of $3.3 trillion, in spite of the decline in 2015. China’s foreign reserves also took a hit in November 2015 as forex reserves dropped by $87.2 billion. SAFE set aside all concerns concerning the Chinese economy, stating that the fundamentals remain strong and there was no reason for serious concern as the country’s financial system was robust and resilient.

China’s administration stated that it intends to make cross-border investments and trade much easier than it is at present and go on to encourage the convertibility of the yuan under the capital account, in a systematic way. SAFE also confirmed that it will reinforce the monitoring of the country’s balance of payments and advance the regulation of cross-border capital flows and foreign debt.

It also proposes to manage China’s huge foreign exchange reserves better, and expand the means of using them. Although the country has the largest foreign exchange reserves, nearly half of which were converted into U.S. treasury bonds, thereby making China, America’s largest creditor.

The Chinese forex reserves went into a massive decline last year when its economy plummeted below seven percent, during the penultimate quarter of 2015. China’s economy has witnessed double digit growth figures since 2010 but analysts have now indicated that this decline will continue in 2016 and extend into 2017. As the country’s exports continue to decline, China has kick-started a whole series of reforms in order to change its economy that is dependent upon exports, into one that relies more on local consumption. Under relentless pressure the Chinese currency dropped to its lowest in five years, against the American dollar during the first week of Jan 2016.

China is also bent on accelerating its overseas direct investment (ODI) that crossed the $104 billion mark in just 11 months last year, with numerous Chinese companies increasing their investments overseas under the Silk Road program which was initiated by President Xi Jinping.

About the Author

Clive Nelson

Clive Nelson Author

Hi, my name is Clive Nelson and welcome to Traders Bible. Just to tell you bit about myself…I have been trading FX and binary options for the best part of 10 years now. After graduating with honours in economics, I began working for an investment bank in New York as an assistant trader before working my way up. After a few years, I went on to work as a broker in London, England and then eventually came back to the U.S to work in a hedge fund, where I manage $800 million of my clients’ investments. There have been times over the course of my career where I’ve had to take a hit, but I’ve accepted that losing is part of the game, it’s a learning curve. I’ve learnt from my mistakes and you don’t have to make the same errors I did. A lot of my education came from when I was a broker and this is why I’m here to tell you that Traders’ Bible offers you the foundations of how to become a great trader.

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