China's FX reserves fell

January 9, 2017

Unsurprisingly, FX reserves in China fell in December. However they stay above the pivotal level of 3tn USD. Yet it is probably a matter of time until the level is broken below as capital outflows are likely to be continued. Reserves tumble as yuan tumbles, last week PBOC probably intervened on the markets to keep yuan bears in check. PBOC said on Saturday that FX reserves decreased by  $41.1 billion to a fresh five-year low of $3.01 trillion (in line with expectations).

The China’s FX reserves shrink amid yuan depreciation and the situation is likely to be continued, source: BBG

According to BBG, China’s foreign currency holdings fell for a sixth month in December, bringing last year’s drop to $320 billion as the yuan posted its steepest annual slide in more than two decades. State Administration of FX (SAFE) said in a statement that last year FX reserves drop was mainly due to the PBOC efforts to stabilize the yuan. Despite the yuan tumble and reserves drop, we see a strengthening in economic indicators as both manufacturing and services PMI came better than expected. 

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