China's forex reserves rise to 16-month high

BEIJING--China's foreign-exchange reserves rose to a 16-month high last month amid tight regulations and a stronger yuan.

The reserves--the world's largest--rose $21.5 billion to $3.161 trillion in January, compared with an increase of $20.67 billion in December, data from the People's Bank of China showed Wednesday. Economists polled by The Wall Street Journal had expected a $30 billion increase.

A drop in the market value of China's holdings of U.S. Treasurys last month likely offset some gains from the increased value of foreign-currency holdings other than the dollar, economists said ahead of the release.

The WSJ Dollar Index, which measures the U.S. dollar against a basket of 16 currencies, fell 3.2% last month, boosting the valuation of other currencies in the reserves.

Beijing tightened scrutiny on capital movements in 2017 to reduce outflows. Meanwhile, a firmer yuan has reduced the central bank's need to draw on the reserves.

The yuan rose about 3.4% against the dollar last month, according to Wind Information, a financial-information provider.

Pan Gongsheng, head of China's forex regulator, said in a statement Wednesday that authorities' macroprudential management of cross-border capital flows "has returned to a neutral nature."

Analysts say the government is feeling less capital-outflow pressure in the wake of a stronger yuan and restrictions on outbound investment.

The reserves level will remain largely steady as the two-way fluctuations in the yuan exchange rate become more prominent, the State Administration of Foreign Exchange said.

--Liyan Qi

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