'China's ambitions to globalise yuan hit by currency fall'

China's ambitions to globalise yuan has suffered a blow after an accelerated drop in the forex reserves of the world's second largest economy and a decline in the value of its currency, analysts have said.
Foreign exchange reserves stood at USD 3.05 trillion in November, down by USD 69.1 billion or 2.2 per cent from October, State Administration of Foreign Exchange (SAFE) said.
China's forex reserves fell to a five-year low last month.
The November figure is the largest monthly drop since January this year, and it brings China's foreign exchange reserves to the lowest level since March 2011.
A firmer US dollar against other currencies after the US presidential election has also dragged down China's foreign exchange reserves, a SAFE statement said yesterday.

Accelerated economic growth in the US, a potentially imminent interest rate hike and expectations of President- elect Donald Trump's expansionary fiscal policies have already caused the Dollar Index to advance six per cent in the last two months, a report by the state-run Xinhua news agency said.

The yuan has weakened around three per cent against the dollar during this period. The fall in the value of the yuan, reduction in foreign exchange reserves and the government's measures to control outbound investment have all come at once.
They have dealt a blow to China's ambitions to make the yuan an international reserve currency along with the dollar, euro, pound and yen which together comprise the special drawing rights basket of the International Monetary Fund, Hong Kong-based South China Morning Post said in a report today.

China's efforts to calm market concerns about the yuan's value or breaking the one-way bet on its depreciation have so far achieved only limited success, if any at all, it said.
Tim Condon, chief Asia economist at ING bank in Singapore, said the rapid fall was undermining the Chinese government's plan of a gradual and orderly decline.
"The authorities will respond by tightening capital controls and stabilising the daily midpoint, which they have done in past episodes of market turbulence," Condon said.
In a joint statement released on Tuesday, the central bank and the National Development and Reform Commission, the state's economic planning agency warned of "irrational investment" in foreign properties, hotels, cinemas, entertainment and soccer clubs.

Documents obtained earlier by the Post show capital outflow controls are already in force involving forex clearance for outbound investment of more than USD five million, plus stricter reviews in place over very large deals.
Both outbound investment and these mega deals are set to limit the speed and size of capital flow.
"The recent control measures are pre-emptive to prevent capital outflow pressure from rising on the US Federal Reserve's highly likely interest rate rise in December," Zhu Qibing, chief macro analyst at mainland brokerage CITIC Securities International, told the Post.
China's Outbound Direct Investment surged to USD 102.75 billion in the first seven months of this year.