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China’s foreign exchange reserves rose in February, surprising analysts by breaking an eight-month string of declines and offering the latest evidence that a stable renminbi and tighter capital controls are succeeding in staunching capital outflows.

China’s currency weakened by a record 6.5 per cent against the dollar in 2016 amid unprecedented capital outflows. In response, the central bank sold dollars from its reserves to relieve pressure on the currency. Foreign exchange reserves fell below $3tn for the first time in five years in January.

But they rose by $6.9bn to reach $3.01tn at the end of February, the central bank said on Tuesday. Analysts had expected a decline of $25bn, according to a Reuters poll.

Adjusting for valuation effects from exchange-rate fluctuations, reserve inflows were probably even higher at about $25bn, according to an FT estimate. The dollar strengthened against a range of global currencies in February, reducing the dollar-denominated value of Chinese reserves held in euro, yen and other non-dollar currencies. 

Following last year’s weakening the renminbi has held firm in 2017, rising 0.7 per cent so far this year. That has reduced investor appetite to move money offshore. Strong growth figures have bolstered confidence, while higher money-market interest rates since late 2016 have discouraged outflows by increasing the yields available on renminbi assets. 

But analysts warn that recent signals from the Federal Reserve that another US rate rise is coming this month will increase the lure of US dollar assets relative to China. 

“I don’t think this is necessarily a turning point. You can’t say that because February data looks good, it’s going to stay good,” said Zhang Yu, head of international research at Minsheng Securities in Beijing. “This data mainly reflects that the renminbi has performed well at the start of the year. But looking ahead, outflow pressure will still be significant.” 

Beyond currency and interest-rate factors, regulators have imposed a series of measures to limit outflows. The new limits include tighter approvals for foreign acquisitions by Chinese companies, increased disclosure requirements on forex purchases by individuals, and limits on banks’ cross-border renminbi remittances. Chinese football clubs also face new limits on signing expensive foreign stars. 

Illustrating the effect of new capital controls, outbound foreign direct investment from China tumbled by 36 per cent in January, including an 84 per cent decline in outbound real estate acquisition, according to the commerce ministry. Outbound acquisitions had surged to a record $144bn in 2016, with real estate among the most popular targets. 

But regulators have sought to reassure investors that the clampdown is primarily aimed at rooting out fraud and discouraging “irrational” foreign investments such as those outside an acquirer’s core business. They have said legitimate investments will not be blocked. 

“The regulator’s focus on accurate and complete disclosures is having an impact. Outbound investment has fallen back to a reasonable range,” said Yan Ling, economist at China Merchants Securities in Beijing. “Going forward, the key factor is the external environment. 2017 will be better than 2016, but it’s not clear if things can continue like this.” 

Additional reporting by Ma Nan

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