Despite China’s draconian policies that aim to maintain high foreign currency reserves, the country is leaking wealth fast as citizens rush to convert their yuan into foreign currency. Bloomberg reports:
- Reserves fell $12.3 billion to $2.998 trillion, the People’s Bank of China said Tuesday
- That compares with the $3.004 trillion estimate in a Bloomberg survey of economists
- The central bank’s intervention in foreign-exchange markets drove the drop, as did seasonal factors such as high demand for other currencies during the week-long Lunar New Year holiday, the State Administration of Foreign Exchange said in a statement
Further erosion of the world’s largest stockpile may prompt policy makers again to tighten measures for controlling outflows and on companies transferring money to other countries. Authorities recently rolled out stricter requirements for citizens converting yuan into foreign currencies as the annual $50,000 foreign exchange quota for individuals reset Jan. 1.
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China forex reserves drop $70bn
Jeremy Jones, CFA
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