Forex savings drop by US$592m in July
By Hu Yuanyuan (China Daily)
Updated: 2005-08-13 07:14

China's foreign exchange savings dipped 4.8 billion yuan (US$592 million) in July after the revaluation of RMB three weeks ago, to 160.5 billion yuan (US$19.8 billion), according to a statement from the People's Bank of China (PBOC) on Friday.

The ratio of the US dollar to RMB in the inter-bank market closed at 8.10 on Thursday, the lowest lovel so far after revaluation.

Compared with the closed price of RMB on July 22, RMB has appreciated by 0.134 percentage point. Meanwhile, RMB trading on the inter-bank markets is quite brisk, topping 2.12 trillion yuan (US$262 billion) last month. Daily trading is averaging 100.9 billion yuan (US$12.5 billion), skyrocketing 96.2 per cent.

"I don't think the jump is mainly caused by the revaluation of RMB," Li Ruoyu, an economist with the State Information Centre told China Daily. "The main reason, I believe, is that commercial banks are tempted to put money in the inter-bank market where potential risks are lower than lending."

The money supply and credit growth grew steadily in July, at a proper pace to keep a sound economy, analysts said.

Growth of broad money supply or M2, which covers cash in circulation and all deposits, climbed 16.3 per cent on a year-on-year basis in July, according to the statement.

The growth rate was 0.6 of a percentage point higher than was recorded at the end of last month. "The increasing step is a little quicker, but still within a reasonable scope," He Xin, an analyst with China Merchants Securities, told China Daily.

Outstanding local currency loans increased by 13.1 per cent on a yearly basis, hitting 18.59 trillion yuan (US$2.29 trillion) by the end of July. That was 0.2 of a percentage point lower than a month earlier.

However, RMB loans in July dropped 32.1 billion yuan (US$3.96 billion), 30.1 billion yuan (US$3.71 billion) lower on a yearly basis.

"The plummet is for seasonal reasons," said the PBOC's statement.

Usually, RMB loans are inclined to be lower in the first month of each quarter, He explained.

Outstanding local currency savings jumped 17.6 per cent on a yearly basis, reaching 27.07 trillion yuan (US$3.34 trillion) by the end of July. And the outstanding RMB savings from residents rose 17 per cent compared with the same period last year, topping 13.37 trillion yuan (US$1.65 trillion) and 0.7 of a percentage point higher than a month earlier.

"The increasing savings show a shrinking domestic demand," said Li Ruoyu. "That is partly due to the government's efforts to cool down the real estate industry, and people finding a narrower channel for investment."

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