Chinese banks bought more foreign currency than they sold for clients in November, leading to a net purchase of $18.5bn in foreign exchange in over-the-counter transactions, figures from the State Administration of Foreign Exchange showed on Monday.

Reuters reported that it marked a sharp increase from a net purchase of $7.8bn in October.

In the first eleven months, Chinese banks made net foreign exchange purchases of $56.3bn, SAFE, the country’s forex regulator, said in a statement on its website, www.safe.gov.cn

It added that Chinese banks were also net buyers of $5.4bn in the forwards market last month.

China has the world’s largest foreign exchange reserves, standing at $3.29tn the end of September, accumulated as a function of the country’s capital controls which saw exporters and investors sell dollars to Chinese banks, which in turn sold most of them to the central bank.

But commercial banks have sold less foreign currency to the central bank, the People’s Bank of China, in recent months in response to easing restrictions on FX holdings and borrowings.

The central bank had earlier said China’s entire banking system sold 73.6bn yuan worth of foreign exchange on a net basis in November, reversing from two consecutive months of net purchases.

Source: Punch