China forex reserves hit 33-month low on ‘record outflow’

China’s foreign reserves in November fell to the lowest level since February 2013 on what some experts called the mainland’s biggest capital outflow on record.

The reserves held by the central bank fell to US$3.44 trillion at the end of last month, down US$87.2 billion, according to data released on Monday by the People’s Bank of China.

Expectations that the yuan will continue to devalue has led to strong demand for US dollar, forcing the central bank to intervene in the market to prop up the value of the yuan.

The strengthening of the dollar during November caused a revaluation of the assets China holds. About 30 per cent of China’s reserves are denominated in currencies other than the dollar and led to at least part of the drop, analysts said.

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“That would count for about half of the outflow but not all of it,” said Hong Hao, chief strategist at Bocom International in Hong Kong. “This is still a very significant outflow. It shows strong demand from China’s private sector to buy dollars.”

Factoring in the decrease in value of other currencies, Capital Economics estimates that the central bank sold around US$57 billion in November. If China’s goods and services surplus hit the projected US$55 billion last month, the London-based research house said that would imply net capital outflows of US$113 billion, compared to US$37 billion in October.