As of the end of January 2013, the balance of funds outstanding for foreign exchange of Chinese financial institutions recorded 26.54 trillion yuan, as announced by People’s Bank of China (PBoC) on Tuesday. The new funds outstanding for foreign exchange surged to 683.66 billion yuan, nearly 4.8 times last year’s high of 140.9 billion yuan, reaching a historic high for a monthly increase.

As of the end of last year, the balance of funds outstanding for foreign exchange was 25.85 trillion yuan. Further more, the balance of fiscal deposits as of the end of January was 2.77 trillion yuan with new fiscal deposits being 353.79 billion yuan in the month, as indicated by the PBoC. Hence, the liquidity in the market was increased by 353.79 billion yuan in January.

On Monday, the bank valet written guarantee surplus shot to $92.6 billion yuan as released by the State Administration of Foreign Exchange (SAFE), recording the historic high. The data implies that the January foreign reserve may approach the highest level in history, revealing the huge amount of net inflow of short-term capital in the balance of international payments.

Most analysts deem it to be merely a short-term phenomenon. The influence of new funds outstanding for foreign exchange over the whole year is inclined to be positive, but never “extremely optimistic”.

“Undoubtedly, this year’s new funds outstanding for foreign exchange will be far beyond last year,” said financial expert Zhao Qingming. “Seen from the current situation, funds outstanding for foreign exchange again constitute an important resource to provide base currency to the market.”

The director of the macro-economy research center of Merchant Securities, Xie Yaxuan, expected of the new funds outstanding for foreign exchange will slump, but still higher than 100 billion yuan.

Lu Jianxin, senior reporter with Reuters Shanghai commented on the foreign reserve data that after January 2008 the previous high of 654 billion yuan was reached, major western economies conducted large-scaled quantitative easing policies, and around the end of last year the expectation of Chinese economic recovery up-surged which reignited expectations for RMB appreciation, triggering the tremendous inflow of overseas funds into China. The PBoC and state-owned banks had to buy large quantities of foreign exchange to stabilize the RMB exchange rate and resulted in the loose liquidity in the money market.

The Wall Street Journal also commented on the data— new funds outstanding for foreign exchange increased for the second consecutive month, revealing the accelerating recovery of the Chinese economy and the heating up of RMB appreciation expectations. Thus, China’s continuing inflow of capital.