Forex purchase growth to defy May slowdown

China will see continued growth in its purchase of foreign exchanges despite central bank data indicating a sharp slowdown in forex purchases last month, Shanghai Securities News reported on Saturday. The net purchase in May hit a six-month low of 66.86 billion yuan, slumping from April's 294.35 billion and the average 315.3 billion during the first four months of the year, according to data released on Friday by the People's Bank of China. Analysts say this is a result of regulator's rules to step up controls on capital inflows and the weakened expectation for yuan appreciation, the report said. However, Zhao Qingming, a finance expert with the China Construction Bank, said that even though the market's expectation for the yuan's appreciation against the U.S. dollar has weakened, there is not yet a depreciation view of the yuan. "We have not actually sensed the market's depreciation expectation for the yuan yet, and the margins of interest rates and forex transactions still exist," Zhao said, adding that the net monthly increase of forex purchase will be hard to control. Trade surplus, foreign direct investment, and inflow of speculative capital are among reasons lifting the nation's forex purchase positions. The nation's net forex purchases totaled 1.22 trillion yuan in the first three months of 2013, more than double last year's total. Experts believed that the slow growth of foreign trade is partly due to government rules to curb capital inflows disguised as trade payments. This pushed the country's top forex regulator to announce rules in May to step up controls on capital inflows, including stricter checks on mismatches between cargo and cash flows and increased oversight of current account transactions.