China’s FX reserves still ample, but show outflow pressures persist – ANZ

Analysts at ANZ provide their after thoughts on the Chinese FX reserves data published by the PBOC earlier this week.

Key Points:

China’s FX reserves declined below the three trillion dollar mark in January, to the lowest level in six years.

Positive valuation effects were not enough to offset intervention activity.

Though there were some seasonal factors, outflow pressures persist despite the authorities tightening up on administrative measures.

While China still has adequate levels of reserves, the authorities face the policy trilemma and ultimately need to decide which lever to let go.