Newspaper Cutting 015 - Coronavirus: China foreign exchange reserves drop to 17-month low as market turmoil pushes up US dollar

Vocabulary : 
(1) foreign exchange reserves = 外匯儲備 
(2) market turmoil = 市場動蕩 
(3) financial assets = 金融資產 
(4) foreign bonds = 外國債券 
(5) fluctuation = 波動 
(6) exchange rate = 匯率 
(7) global impact = 全球影響 
(8) coronavirus pandemic = 冠狀病毒大流行 
(9) plunge = 暴跌 
(10) billion = 十億 
(11) trillion = 兆 
(12) poll = 投票 
(13) nominal depreciation of assets = 資產名義貶值 
(14) denominated = 計價 
(15) reserves portfolio = 儲備的投資組合 
(16) crash = 崩潰 
(17) scramble = 爭奪 
(18) has slipped = 滑倒了 
(19) slump = 暴跌 
(20) lockdown = 封鎖 
(21) emerging markets = 新興市場 
(22) equities = 股票 
(23) dominate = 支配 
(24) domestic retail investors = 本地散戶投資者 
(25) reassure = 放心 
(26) decisiveness = 決定性 
(27) have ramped up = 已經加速了 
(28) fiscal policy = 財政政策 
(29) monetary policy = 貨幣政策 
(30) kick-start = 啟動 
(31) normalise = 正常化 
(32) incidence = 發生率 
(33) street-side stores = 街邊鋪 
(34) currency strategy = 貨幣策略 
(35) were subdued = 被制服了 
(36) potential downside = 潛在缺點 
(37) defend the yuan = 捍衛人民幣 
(38) ramped = 減速 
(39) capital controls = 資本控制 
(40) International Monetary Fund (IMF) = 國際貨幣基金組織 
(41) minimal safe level = 最低安全水平 
(42) strategist = 策略師 
(43) massive outflows = 大量外流 
(44) approaching = 接近 
(45) threshold = 門檻 
(46) market stresses = 市場壓力 
(47) troy ounces = 金衡盎司 

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Coronavirus: China foreign exchange reserves drop to 17-month low as market turmoil pushes up US dollar - 7 Apr, 2020

Central bank data showed on Tuesday that China’s foreign exchange reserves – the world’s largest – fell US$46.085 billion in March to US$3.061 trillion 

The fall was due to changes in prices of financial assets held by China, such as foreign bonds, and fluctuations in exchange rates, authorities said 

China’s foreign exchange reserves fell to their lowest level in 17 months as global impact of the coronavirus pandemic caused a plunge in global asset prices and a rise in the US dollar exchange rate. 

Central bank data showed on Tuesday that China’s reserves – the world’s largest – fell US$46.085 billion in March to US$3.061 trillion. That was much worse than the expected drop of US$6.718 billion to $3.100 trillion, according to an economists poll by Reuters. 

The fall was due to changes in prices of financial assets held by China, such as foreign bonds, and fluctuations in exchange rates, China’s State Administration of Foreign Exchange said in a statement after the data release. 

A stronger US dollar leads to nominal depreciation of assets denominated in other currencies in China’s reserves portfolio. 

Stock markets around the world crashed last month and investors scrambled for the safety of US dollar funding. Global markets are currently down 20 per cent from this year’s peak, while the yuan’s exchange rate has slipped by 1.7 per cent against the US dollar, compared to Singapore dollar’s 6 per cent drop and the Indonesian rupiah’s 15.4 per cent slump. 

Outflows from Chinese stocks hit US$12.3 billion in March, according to the Institute of International Finance. However there are signs that outflows are starting to ease as China brings the outbreak under control and businesses and factories reopen after a two-month lockdown. 

Geoffrey Wong, head of emerging markets and Asia-Pacific equities at UBS Asset Management, said the relatively stable Chinese market, which is dominated by domestic retail investors, suggests domestic Chinese citizens are reassured by the decisiveness of their government. 

Authorities have ramped up fiscal and monetary policy support to kick-start the economy as restrictions are being removed. On Friday, the central bank cut the amount of cash that small banks must hold as reserves, releasing around 400 billion yuan (US$56.38 billion) into the banking system. 

Morgan Stanley’s China chief economist Robin Xing Ziqiang said Chinese businesses continued to normalise with consumer behaviour improving. There has been increased working hours, and reduced incidence of working from home in the last two weeks, while more people were also going out to street-side stores and restaurants, Xing noted. 

Peter Kinsella, global head of currency strategy at Union Bancaire Privee, said that Chinese capital outflows were subdued in recent months despite the economic shutdowns seen in China and Asia. 

The Chinese authorities will continue to manage the exchange rate carefully, meaning there is limited potential downside over the coming months, Kinsella said. 

After burning through US$1 trillion of reserves to defend the yuan in the last economic downturn in 2015, officials have ramped capital controls to stabilise China’s currency and keep reserves around US$3.1 trillion, which the International Monetary Fund had previously said was the minimal safe level. 

Ken Cheung Kin-tai, chief Asian currency strategist at Mizuho Bank, said massive outflows were unlikely and China’s reserves would be stable, even though the level was approaching the US$3 trillion threshold. 

“Currently people need US dollars not because of fundamental or policy reasons in the US, but because of market stresses,” Cheung said. “But conditions should gradually improve and keep the yuan and China’s reserves relatively stable.” 

Tuesday’s data also showed China held 62.64 million fine troy ounces of gold at the end of March, the same as at the end of February.

Source : https://www.scmp.com/economy/china-economy/article/3078839/coronavirus-china-foreign-exchange-reserves-drop-17-month-low

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