China hemorrhages reserves

China has chewed through close to half a trillion dollars of its foreign currency reserves (excluding gold) over the last year, supporting the Yuan.

China Foreign Reserves ex-Gold

But the Yuan continues to sink against the US Dollar.

USDCNY

When people don’t have a say in how the country is run, their capital tends to vote with its feet.

4 thoughts on “China hemorrhages reserves

  1. […] The Shanghai Composite Index is again testing support at 3500. Reversal below 3300 would confirm another assault on primary support at 3000. I remain wary of China because of the high Debt to GDP ratio, the need to wean itself off investment stimulus, and impending rate rises in the US which could encourage further capital outflows. The PBOC has massive foreign currency reserves which act as a buffer, but these have already been depleted by half a trillion Dollars. […]

  2. […] capital outflows from China. The PBOC’s massive foreign currency reserves act as a buffer but have already been depleted by half a trillion Dollars. Loosening the peg against the Dollar may soften the immediate impact on reserves. But a falling […]

  3. […] currency reserves in order to slow appreciation of the Dollar, while maintaining the peg. But reserves have already fallen by half a trillion Dollars and the pace is likely to accelerate when the Fed raises interest rates. Be prepared for a wild […]

  4. […] factors also weaken the Dollar. The Peoples Bank of China is selling off reserves to support the falling Yuan. This is likely to continue as capital outflows from China maintain […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s