China FX Reserves leaking again

Stories here, here and here on China FX Reserves dropping by more than USD87.0bn in November. In August, they declined by around USD94.0bn. The FT article has a mitigating quote, attributed to a China-based analyst, in the end. Reserves are the lowest in more than two years now. Should not be surprised. Second and third quarter saw back-to-back capital outflows out of China. October was a partial reversal, it seems. It has resumed in November.

The Bloomberg story is important for it says that the amount of Reserves People’s Bank of China (PBoC) is expending could be more than what is gleaned from the reduction in Reserves. It is accumulating contingent foreign currency liabilities through Forward Contracts – something that Thailand did in 1997-98 and was caught out. It is not clear if China’s FX Reserves disclosure includes disclosure on forward currency positions.

According to this Yahoo! Finance story, Julian Evans-Pritchard of Capital Economics in Singapore estimates that capital outflows in November out of China were USD113.0bn.

Advertisements

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