Chinese capital outflow eases

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Via Capital Economics:

• The People’s Bank (PBOC) appears to have intervened little in FX markets last month, suggesting that the renminbi is not facing much downward pressure at present. However, with the economy likely to slow and interest rates likely to fall further over coming months, pressure is likely to return later this year.

• The value of the PBOC’s reserves amounted to $3,088bn at the end of January, up $15bn from a month earlier. (See Chart 1.) • The increase appears to have been due mainly to valuation effects. The State Administration of Foreign Exchange noted in its statement accompanying the data that the pick-up in reserves was driven by the impact of movements in exchange rates and bond prices. Our model had also suggested that the valuation effects would push up the value of reserves in January by $10bn.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.