Forex Reserves Increase for Third Straight Month as Beijing Puts Brakes on Capital Outflows

China’s foreign exchange reserves increased for the third consecutive month in April, reaching $3.03 trillion by the end of the month, official data showed Sunday.

The country’s forex reserves saw a rise of $20.45 billion, or 0.68%, from the end of March, according to figures from the People’s Bank of China. The balance began climbing back up in February after eight months of decline. The current three-month period of expansion is the first since June 2014.

Last month’s increase was due to cross-border capital flows’ continuing to stabilize in April, a balanced foreign exchange supply and demand, and currencies’ appreciating in relation to the dollar, a State Administration of Foreign Exchange representative said.

Out of these factors — a steadying yuan in relation to the dollar — accounted for $15.2 billion of the $20.45 billion increase in the foreign exchange reserve balance from March to April, China Merchants Securities macro analysts Xie Yaxuan and Yan Ling said. The average exchange rate of the yuan against the U.S. dollar in April was 6.8845, up 86.74 price interest points from March.

U.S. debt accounted for $18.5 billion of China’s forex reserve balance in April, China Merchants Securities estimated. U.S. Treasury 10-year yields fell from 2.39% at the start of April to 2.28% by the end of the month, hitting a five-month low of less than 2.2% on April 17 amid uncertainty over events on the Korean Peninsula.

China Merchants Securities analysts said the official data show that in April, the central bank reduced the supply of yuan in the foreign exchange market. Despite an impending U.S. Federal Reserve interest rate hike in June, the yuan exchange rate is expected to remain stable, and capital outflows are no longer a key influence on domestic capital, the analysts said.

China has in recent months tightened control on capital outflows, alarmed by the increased movement of money out of the country since 2014. Measures have included making it harder for domestic companies to invest abroad, and heightening scrutiny of individuals exchanging yuan for foreign currency.

At the end of April, China’s reserves of Special Drawing Rights (SDR), the International Monetary Fund’s special international reserve asset, was 220.986 billion SDR, a decrease of 8.017 billion SDR from the previous month, PBOC data also showed. The country’s gold reserves remained at 59.24 million troy ounces for the seventh month in a row.