Chinese banks see smaller forex surplus

Chinese banks see smaller forex surplus Beijing: Chinese banks bought more foreign currency from clients than they sold in May, although the surplus was less than that of previous months, indicating relieved pressure from capital inflows.

The forex surplus hit USD 17.2 billion in May, marking the ninth straight month of surplus in bank-to-client forex transactions, the State Administration of Foreign Exchange (SAFE) said.

The surplus was far less than those recorded in the first four months of the year, coming in at roughly half of the USD 34.3 billion surplus recorded in April, reported Xinhua.

Individuals and institutions exchanged USD 150.5 billion in foreign currency for yuan through Chinese banks while buying USD 133.3 billion in foreign currency from financial institutions in May.

The continued surplus indicates strong market expectations for the yuan's appreciation, said China Merchants Bank analyst Liu Dongliang.

The yuan edged up nine points to 6.1598 against the US dollar Monday, setting a record high.

Speculative money is also behind the rising yuan, as China's relatively high interest rates in comparison to other countries are attractive to investors.

Bank-to-client foreign exchange transactions are a source of fluctuation in China's foreign exchange reserves, although the figures are not equated with foreign exchange reserve data.

China's foreign trade grew 0.4 percent year on year in May to $345.1 billion, down from the 15.7-percent gain seen in April, the General Administration of Customs said.

The slow growth of foreign trade has been partly caused by government efforts to curb capital inflows disguised as trade payments, experts said.

SAFE announced in May that it would step up oversight for capital inflows. This includes stricter checks on mismatches between cargo and cash flows and increased oversight for current account transactions effective from June 1.

IANS