China expects weak capital inflows in 2012
BEIJING CHINA’S central bank and commercial banks bought a net $4 billion in foreign exchange in February, marking a second straight month of net capital inflows despite a trade deficit.
But analysts say the central bank may have to cut the amount of cash banks must hold as reserves to compensate for weak capital inflows into the world’s secondlargest economy due to global and domestic economic risks and slower rises in the yuan.
China made net foreign exchange purchases of 25.1 billion yuan ($3.97 billion) in February, according Reuters calculations based on central bank data published on Friday.
The net inflows came despite China posting a $31.5 billion trade deficit in February, its largest in at least a decade, and falling foreign direct investment (FDI).