China forex regulator says not worried about capital outflows

BEIJING (Reuters) - China's foreign currency regulator is not concerned by signs of forex outflows, the country's State Administration of Foreign Exchange (SAFE) said on Thursday, saying a recent decline in forex reserves is in line with China's policy goals.

However, China is closely monitoring the impact of any changes in U.S. monetary policy, and has detected signs of increased volatility in cross-border flows, the spokesperson told a news conference in Beijing.

The remarks were made by Guan Tao, head of the department of international payments at SAFE, who added that SAFE will develop derivative instruments to help companies better hedge against two-way volatility in the yuan exchange rate.

China's foreign exchange reserves, the world's largest, fell slightly to US$3.89 trillion at the end of September from US$3.99 trillion at the end of June, central bank data showed.

Some analysts said the decline suggested speculative "hot money" outflows from China amid increased market jitters about whether the world's second-largest economy may be at risk of a sharper slowdown.

China's vast factory sector grew a shade faster in October as firms drew more foreign and domestic orders, a private survey showed earlier on Thursday, but analysts say the modest expansion does not indicate a turnaround for the cooling Chinese economy.

Guan attributed the decline in forex reserves to the rise of the dollar against other currencies.

He also said that the central bank was gradually ceasing intervention in the forex market.

The yuan has been on a steady uptrend since late May but remains down year-to-date after the currency slumped early in the year, which many traders said was due to central bank behind-the-scenes manipulation targeting speculators.