Investing.com - China’s foreign exchange reserves recorded the largest monthly drop on record in December, falling to the lowest level in almost three years amid mounting concerns over slowing growth in the world’s second-largest economy.
Data from the People’s Bank of China on Thursday showed that its foreign exchange reserves shrank by $107.9 billion in December, the largest monthly drop on record, after decreasing by $87 billion in November.
Overall reserves are now standing at $3.33 trillion, the data showed, after falling in 13 of the past 15 months.
The data indicated that Beijing was forced to spend more dollars to shore up the yuan last month, amid accelerating capital outflows.
The outflow of investment funds from China has been exacerbated by a slowdown in domestic economic growth, a series of rate cuts by the PBoC and the onset of a monetary tightening cycle by the Federal Reserve.
The PBoC set its official yuan midpoint rate at the lowest level since March 2011 on Thursday, spurring a renewed selloff in the currency and fueling widespread risk aversion in financial markets.
The yuan posted the largest daily decline since last August, when an unexpected near 2% devaluation of the currency sparked a broad based selloff in financial markets.
A weaker yuan would help boost Chinese exports.
While investors had expected the central bank to allow the currency to fall further amid an economic slowdown, the rapid pace of the depreciation so far this year has fueled fears that the world’s number two economy is weaker than had previously been thought.