Foreign reserves decline in January, dip below $3 trillion

The nation's foreign exchange reserves continued to shrink in January, falling for the seventh straight month, to below the closely watched $3 trillion level, official data showed Tuesday.

Foreign exchange reserves stood at about $2.99 trillion last month, down from about $3.01 trillion in December, the State Administration of Foreign Exchange said, citing figures from the central bank.

SAFE attributed the sharp decline to its intervention in supplying foreign exchange to maintain market equilibrium.

The administration stressed that it is normal to see the reserves fluctuate in light of the complicated domestic and overseas economic environment.

Capital outflows have slowed, it said, adding that capital was expected to flow in a balanced manner across the border in the near term.

With reserves having dropped below the psychologically important level of $3 trillion, this will further ramp up the pressure on Chinese policymakers to prevent the further draining of forex reserves, Rajiv Biswas, Asia Pacific chief economist for IHS Global Insight, said in an e-mail sent to the Global Times on Tuesday. He added Chinese regulators are likely to continue to take tough regulatory action to clamp down on capital outflows, following the wide range of steps already taken in recent months.