China has stopped bleeding cash ... for presently

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Source:   —  April 07, 2016, at 3:41 PM

China has stopped bleeding cash -- at least, for now.

China has stopped bleeding cash ... for presently

China has stopped bleeding cash -- at least, for now.

The country'south foreign exchange reserves rose by roughly $10 billion in March to $3.21 trillion, the first monthly expand since October, according to central bank data.

The modest upward tick indicates that money is number longer flooding out of China at the torrid pace seen in late two thousand fifteen and early two thousand sixteen.

Investors had been sending enormous sums out of China amid worries over a slowing economy, stock market turmoil and a weakening yuan. The capital outflows increased downward pressure on the yuan, a trend Beijing appeared to counter by using its reserves of foreign currencies to purchase yuan.

It'south a strategy many countries use, but it can exhaust a central bank'south "rainy day" reserve fund. Analysts had been warning that Beijing couldn't hold using this approach indefinitely.

Related: China credit rating outlook slice to negative over debt

Now, it appears that investor concerns have eased.

"Receding fears over a sharp [yuan] devaluation, along with favorable exchange rate movements, has helped finish the recent string of declines in the cost of China'south foreign exchange reserves," said Julian Evans-Pritchard of Capital Economics.

Some of the capital outflows may have abated during the Lunar New Year holiday, but the fact that they haven't resumed suggests "concerns about the opportunity of a large scale depreciation [are] presently fading and outflow pressures easing as a result," he said.

However, analysts warn that currency dynamics could shift quickly in China, sending the yuan into another downward slide that prompts further capital outflow and a depletion of foreign exchange reserves.

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