China's Oct commercial bank forex sales fall 82% as outflows slow

BEIJING: China's commercial banks sold a net US$20.1 billion in foreign exchange settlements in October, the country's foreign exchange regulator said on Wednesday, falling sharply from September's US$109.2 billion amid signs of easing capital outflows.

Capital outflows eased in October as the domestic stock market recovered after a crash over the summer, alongside the government's efforts to clamp down on illegal money transfers, although concerns remain over China's economic slowdown.

The central bank has intervened heavily to keep the yuan steady after it devalued the currency by nearly 2%.

"This data can be seen as supporting the idea that conditions calmed significantly after big outflows in August and September," said Tim Condon, an economist at ING in Singapore. "I credit the PBoC's exchange rate policy." 

China's surprise devaluation of the yuan on Aug 11 fuelled a wave of capital outflows on fears the economy might be slowing more sharply than thought and on worries of a possible interest rate rise by the US Federal Reserve.

In January-October, commercial banks had net foreign exchange sales of US$321.6 billion, the regulator said on Wednesday.

The OECD said recent government measures, including stricter checks on foreign exchange purchases by firms and individuals and a crackdown on illegal currency transactions, may have curbed capital outflows for now.

"Narrowing of the interest differential and slowing growth, however, may lead to further capital outflows and pressure on the exchange rate," the Organisation for Economic Cooperation and Development said.

China's central bank and commercial banks bought a net US$2.02 billion worth of foreign exchange in October, data from the People's Bank of China (PBoC) showed on Sunday, stemming heavy sales in the previous three months that underlined capital outflows.

"Ancedotal evidence suggests that the PBoC has borrowed sizeable US dollars from the forward market to defend the CNY," Kevin Lai and Junjie Tang from Daiwa Capital Markets wrote in a research report on Nov 11, adding that it would be difficult to determine money outflows by tracking changes in FX reserves. - Reuters