PBC makes net sale of forex

China's central bank sold 41.2 billion yuan ($6.7 billion) worth of foreign exchange in June, ending a six-month run of net purchases, according to data released by the People's Bank of China (PBC) Monday.

By the end of June, China's total yuan funds outstanding for foreign exchange via financial institutions stood at 27.39 trillion yuan, lower than the 27.43 trillion yuan of May, according to the data.

"The monthly decline in June is mainly because expectation that the yuan will appreciate has fallen after US Federal Reserve Chairman Ben Bernanke signaled a gradual end of the Federal Reserve's stimulus efforts," He Weiwen, co-director of the China-US-EU Study Center under the China Association of International Trade, told the Global Times Monday.

Expectation that the yuan will appreciate is declining due to China's slowing GDP growth and weak trade data. China's exports fell 3.1 percent to $174.32 billion in June from a year earlier, while imports decreased 0.7 percent to $147.19 billion, leaving a trade surplus of $27.13 billion, higher than the $20.43 billion seen in May, according to official data.

"Enterprises are reluctant to exchange foreign currency as the US is likely to raise interest rates," He explained.

China recorded its lowest net purchase of foreign currency in May since June 2002.

"In most cases, foreign capital that enters China will be sold to the central bank. So the decline of the yuan funds outstanding for foreign exchange reflects capital outflow from the country," Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, told the Global Times Monday.

"The decline in June also reflects intensified concern over the growth of the world's second-largest economy. But increasing expectation of yuan depreciation is good for export firms, as they don't need to face the pressure of a fluctuating foreign exchange rate," Zhou said.