Chinese banks' forex deposits surpass $1 trillion for the first time

China's commercial lenders had a record $1.38 trillion of foreign exchange by the end of May, with the majority being held in deposits, according to the People's Bank of China.

Chinese banks’ stockpile of foreign-currency deposits has surpassed $1 trillion for the first time, creating an opportunity for Beijing to allow greater freedom for capital to flow out of the country.

The pool has been growing as surging demand for Chinese goods during the pandemic has beefed up foreign earnings of exporters, while the resilient economy and strengthening currency have lured overseas investors to sell dollars for yuan to buy Chinese stocks and bonds. Bank deposits in foreign currencies jumped more than $260 billion in the year through May, the most in data starting in 2002.

Then a mismatch sets in: despite