BEIJING: China's foreign exchange reserves, the world's largest, fell $20.6 billion in the fourth quarter to $3.18 trillion, central bank data showed on Friday, as a narrowing trade surplus and an outflow of speculative funds reversed the accumulation of dollars.
The drop in reserves between the end of September and December may appease some critics who say China's giant reserves are a testament to an economy that relies on an under-valued yuan for export-driven growth.
The median forecast by economists was for China's foreign exchange reserves to hold steady at the end of December from the end of the third quarter.
However, some analysts have warned that the recent pullback in reserves is only temporary and a function of weakening global demand and skittish financial markets.
Data from the People's Bank of China showed reserves fell in November and December, the first consecutive monthly fall since Q1 2009.
China has amassed the world's largest foreign exchange reserves, reflecting the central bank's action to sterilise inflows dollars in the country's closed capital account.
But the tide of sustained capital inflows started to turn in recent months as a slowing domestic economy and mounting global uncertainties led some investors to withdraw speculative funds.
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