China's foreign exchange reserves fell for a sixth straight month in December to the lowest since early 2011, but held just above the critical $3 trillion level, as authorities stepped in to support the yuan ahead of US President-elect Donald Trump's inauguration.
Reserves fell by a slightly less than expected $41 bn last month to $3.011 trillion, central bank data showed yesterday,following a drop of $69.06bn in November.
Economists polled by Reuters had forecast reserves would drop $51bn to $3.001 trillion.
China's reserves fell nearly $320bn in 2016, after a record drop of $513bnin 2015. Concerns over the speed with which China is depleting its ammunition are swirling, with some analysts estimating it needs to retain a minimum of $2.6 trillion to $2.8 trillion under the International Monetary Fund's (IMF's) adequacy measures.
The yuan depreciated 6.6 percent against the surging dollar in 2016, its biggest one-year loss since 1994, and it is expected to weaken further this year despite authorities' aggressive attempts to slow its descent this week.
Adding to pressure on the currency, Trump has vowed to label China a currency manipulator on his first day in office and has threatened to impose huge tariffs on imports of Chinese goods.
China has stepped up efforts in recent weeks to shore up the yuan and curb capital outflows, sparking speculation it wants a firm grip on the currency ahead of Trump's inauguration on January 20 and the long Lunar New Year holidays at the end of the month.
It has tightened restrictions on individuals and companies who want to move funds out of the country, while denying it is imposing fresh capital controls. This week the central bank has also set higher daily guidance rates for the yuan, hiking it the most in a decade on Friday.
China's foreign exchange regulator, the State Administration of Foreign Exchange (SAFE), said in late December that net cross-border capital outflows were expected to narrow in the fourth quarter in 2016.
The People's Bank of China (PBOC) said in a quarterly report last Friday that it would push reforms of the yuan regime, while keeping the currency basically stable in 2017. The PBOC also raised reporting requirements for overseas transfers last Friday. Reporting threshold for cash and overseas transfers cut to 50,000 yuan from 200,000 yuan.
SAFE recently said it would step up monitoring of individual foreign exchange purchases to close loopholes, but the $50,000 yearly quota would not change. While the yuan has soared this week as China tried to punish speculators, a Reuters poll showed it is expected to slide at least 4 percent more this year, largely as expectations of interest rate hikes in the United States drive the dollar higher.
