China: FX reserves to stay barely above $3tn - SocGen

Research Team at Societe Generale expects China’s FX reserves to drop again by $40bn in December to $3,010bn, due to both unfavourable valuation effects and continued FX intervention by the PBoC. 

Key Quotes

“Nearly all the major reserve currencies dropped further against the dollar in December, and US treasury yields continued to climb. These two factors likely shaved about $15bn off the face value of China’s FX reserves. Furthermore, the PBoC seems to have continued its FX intervention to lean against the heightened pressure from capital outflows and to moderate the pace of USD/CNY depreciation. The reason we are not forecasting an even bigger drawdown of FX reserves is the series of harsh capital control measures introduced since late November.”