China denies foreign exchange withdrawal

Chinese banks post forex deficit of US$400 million in June.

The State Administration of Foreign Exchange said this was the first such deficit since September 2012.

Bank-to-client foreign exchange transactions are a major source of fluctuation in China's foreign exchange reserves. Foreign exchange inflows to China have been slowing since May due to a variety of factors.

The amount of inflows to China has also been significantly lowered due to a series of measures by financial institutions over the past several months to reduce currency speculation disguised as export trade.

SAFE, however, denied any signs of a major forex withdrawal and said China’s forex is expected to stabilize amid fluctuations in the second half of the year.

With the U.S. Federal Reserve poised to phase out quantitative easing, the world's major emerging economies, including China, have seen a depreciation in their currencies and capital outflows since May.