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As China’s foreign currency deposits pass US$1 trillion, banks face unwanted headache, yuan pressure

China’s post-coronavirus export boom has created massive headaches for its commercial banks over how to effectively recycle the huge influx of foreign currencies resulting from overseas sales, and in turn how to generate investment returns, analysts said.

China is also seeing rising capital inflows from other channels, such as foreign direct investment into China’s growing economy, as well as portfolio investment into mainland stocks and bonds. This demand for Chinese assets, in turn, continues to place upwards pressure on the yuan exchange rate, which Beijing is trying to avoid.


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