Monitoring PBOC Foreign Exchange Intervention

While official data show a slowdown in the pace of capital outflows in September relative to August, a broader array of indicators points to a likely acceleration of those flows, particularly given the PBOC’s indirect activities in the offshore CNH market. We estimate the implied September drain on foreign exchange reserves at around $150-200 billion, in contrast to official data showing a $43 billion decline. While transparency into the PBOC’s state intervention behavior has improved, several uncertainties remain, and the slate of October data series will likely have outsized significance in influencing the perceived sustainability of the PBOC’s defense of the yuan’s informal, soft peg to the dollar.

Posted August 1, 2017
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