China Resorts to “Stealth Interventions” to Prop Up Yuan and Stock Market

by Mike ‘Mish’ Shedlock
Mish Talk

A record $1 trillion or so has fled China in the last year or so. Official reserve data is masked, so it’s difficult to pin a precise number.

We do know the official monthly drain is the smallest since June, but Daiwa Capital Markets believes PBOC Using Stealth Intervention as Reserves Decline.

The People’s Bank of China may have bought foreign currency from local banks, used the forwards market to prop up the yuan and asked the nation’s sovereign wealth fund to liquidate overseas assets, Daiwa analysts Kevin Lai and Junjie Tang wrote in a note on Tuesday. While Lai didn’t provide any direct evidence in the note, he said in an e-mailed response that his conclusions were based on a “logical deduction.”

China’s foreign-exchange reserves, the world’s largest currency hoard, shrank by $28.6 billion last month, the smallest decline since June, to $3.2 trillion. That was lower than the $40.9 billion decrease predicted in a Bloomberg survey of economists, and compares with December’s record drop of $108 billion as the monetary authority supported the yuan.

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