Experts noted on Monday that a widening trade surplus and a more stable yuan may help offset declines in China's foreign exchange reserves, which were the subject of much discussion during the G20 meeting held in Shanghai on Friday and -Saturday.
The recent decline in the nation's reserves reflects a shift in foreign currency holdings from the government to domestic enterprises and individuals, something that the government is "willing to see," Yi Gang, deputy governor of the People's Bank of China (PBOC), the central bank, said in an interview with the Xinhua News Agency on Sunday.
Yi also said that the decline in reserves will run its course.
"The speed of capital outflows will gradually fall," he noted during the interview, adding that the yuan's exchange rate will also return to normal.
China's foreign exchange reserves stood at $3.23 trillion as of the end of January, down from $3.33 trillion a month earlier and $3.44 trillion at the end of November, statistics released by the State Administration of Foreign Exchange (SAFE) show.
According to Yi, the shift of foreign currency holdings from the government to companies and individuals will put a halt to the excessively rapid growth of foreign exchange reserves seen in recent years and disperse the risks of China's foreign reserve holdings. The change will also provide a more efficient management solution for domestic foreign exchange assets, he said.
Other factors have contributed to rising demand for foreign exchange in recent months, such as exchange rate changes that altered the book value of China's foreign reserves and early repayments of foreign loans, the PBOC noted at a press conference on Friday.
Ding Jianping, a finance professor at the Shanghai University of Finance and Economics, told the Global Times on Monday that China's foreign exchange reserves shouldn't be viewed as a "bottomless pit" and should be used with caution.
"At a minimum, [the reserves] should be adequate to cover China's short-term foreign debt," Ding noted.
The PBOC also pointed out on Friday that changes in China's foreign reserves are normal and will become "more rational."
Zhou Yu, a research fellow at the Shanghai Academy of Social Sciences, told the Global Times on Monday that if China's trade surplus continues to widen, it will increase foreign exchange inflows, which will help offset the negative influence of foreign reserve declines.
China's trade surplus in goods and services amounted to $35 billion in January, up from $31.8 billion in December, the SAFE noted on Monday.
The yuan's exchange rate, if turning more stable, will also stabilize and diminish demand for foreign currencies, Zhou said.
