China is drawing on its reserves. In 2016, the foreign-exchange reserves of the people’s Republic decreased by nearly 320 billion. Beijing has, however, still a large safety mats to 3.011 billion, the largest foreign exchange reserves in the world.
The chinese central bank had indicated that on the single month of December, the decline was 41 billion dollars. China sells foreign currency in net terms for six consecutive months. In November, $ 70 billion had to be used. As stated by the chinese government, ” the central bank’s efforts to stabilize the renminbi (yuan) is the main reason ” this fall in reserves.
Decline of the yuan 7 %
The yuan has declined by 7 % in a year against the dollar, in the framework of a plan that has largely been liberalized to allow the chinese currency to integrate the calculation of Special Drawing Rights, the “global currency” of the IMF. With the slowdown in growth, the monetary tightening initiated by the Fed and the election of a Donald Trump who seems determined to play the card of protectionism, international capital flows tend to quittre the former Empire of the Middle.
take Action for the monetary stability
The strong and widespread increase in the Us dollar is therefore a challenge for the chinese authorities must avoid a too strong depreciation of the renminbi in order to contain the confidence of investors in assets denominated in yuan. Also, despite the criticism coming from Washington and Europe, as Beijing strives to contain the decline in the yuan by buying of the chinese currency on the markets and, therefore, by drawing on its foreign exchange reserves. The trend has therefore been slow. But the chinese authorities, faced with the challenges of major industrial and, in particular, to an overproduction persistent, must maintain a subtle balance between an impairment charge in favour of its exports and a stability sought by investors.