December saw a further solid increase in Chinese FX reserves, the headline holdings number rising US$38.03bn m/m to US$3,216bn. Again more than half of the rise can be attributed to valuation adjustments as the US dollar continued to depreciate against the balance of the PBoC’s reserve holdings.
China recorded a further reserves build during November, total holdings rising by US$50.51bn to US$3,718bn. Nearly half of the increase can be accounted for by FX effects, specifically the effect of a weakening of the dollar compared to the other components of the reserves basket.
China’s September reserve numbers showed a modest decline to US$3.143trn from US$3.165trn in August. And nearly all of this can be accounted for by FX valuation adjustments. Given the large trade and current account surplus China is currently running though this still implies ongoing outflows of capital, with our rough calculations pointing to an annualised outflow of US$200bn.