China’s currency has recently stabilized after declining to 15-year lows against the dollar. Q2 2022 balance of payments details just released reveal few immediate pressures on the currency—current account surpluses persist, portfolio outflows are slowing, and paydowns of external liabilities are nowhere close to 2015-2016 levels. Stability against the dollar can prevail for a few months, but the next wave of depreciation will come in response to domestic financial stress, requiring more significant PBOC monetary easing steps.
