As Chinese Asset Outflows Monitored, PBOC Yuan Reserves Drop

Yuan reserves signalling trouble ahead?

China’s foreign currency reserves fell by US$41 billion in December, a move that typically reduces the value of China’s yuan. The currency reserve drop was just under the lower range of Bloomberg’s projected consensus drop of -US$42 billion. Adjusting for currency valuation effects, a Goldman Sachs report estimates that the reserves $35 billion in relative US dollar terms. CNBC reported expectations for the drop at $51 billion. In addition to lowering currency values, reducing currency reserves makes it harder to get money out of the country, addressing a growing issue in the region.

Chinese yuan reserves fall, but Goldman Sachs waiting on PBOC FX data to confirm the move

The move to reduce currency reserves came as Chinese residents purchase of foreign assets increased to $273 billion in the third quarter of 2016, up $112 billion quarter over quarter. The reduction brings the total held in reserve just over $US3.01 trillion. Chinese moves to stem capital outflows have been closely watched by market participants.

Goldman Sachs economics research team on the January 8 report, led by MK Tang, is keeping its eye on another data point that confirms the central bank’s moves. The “PBOC FX position,” which is typically released near the beginning of the month, reveals the currency reserve’s book value.