China FX reserves fall as trade and yuan drop

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Recent data concerning FX reserves in China show that outflow of capital from EM in Asia hit also China and fall of these reserves is the biggest in history. Weak yuan (a huge devaluation marked with a red rectangle) provided a significant competitive advantage for China and enabled to accumulate the biggest FX reserves on the world.


Recent drop in Chinese exports contributed to smaller amount of foreign currencies inside China's interbank market. Together with necessity to keep the CNY rate stable  the PBoC was forced to use some of its FX reserves. If the situation continues, it's likely that the PBoC will be compelled to devalue yuan significantly once again.

Source: Bloomberg