Unforced Errors in PBOC Communication

At a time when the People’s Bank of China is trying to reestablish credibility by expanding access to the Chinese interbank bond market and publicizing Governor Zhou Xiaochuan’s thinking about monetary and exchange rate policy, the central bank took a step back by changing its methods of reporting one series used to track foreign exchange reserves, without announcing the adjustment or explaining it.

While this has fed market concerns that the central bank is trying to conceal the volume of capital outflows, the other January data series are all relatively consistent, pointing to a $90-100 billion decline in foreign exchange reserves for the month. The larger source of uncertainty in the reserves data stems from PBOC efforts to intervene via commercial banks in the offshore market, and the limited reporting of activity via the new IMF template on short-term drains on foreign reserves.

Posted August 1, 2017
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