BOFIT Weekly Review 2015/43
Central bank forex interventions and capital outflows from China have increased
The US treasury department’s semi-annual exchange rate policy report also considers China’s capital flows. The newest edition finds capital outflows from China accelerated in August to $200 billion, up from $70–80 billion in July. For the first half of the year, $250 billion flowed out of China, up from less than $30 billion in 1H14. Estimates do not include FDI.
China does not publish information on its forex operations, but the PBoC has largely refrained from daily interventions since summer 2014. After the exchange rate change in August, the central bank re-entered the forex market. The report estimates that PBoC interventions in July-September totalled $229 billion. In particular, the central bank slowed the slide of the yuan during the August turbulence by purchasing $136 billion worth of yuan.
The value of China’s foreign currency reserves fell by $180 billion in the third quarter to $3.514 trillion. Media reports claim that the PBoC and commercial banks have also indirectly supported the yuan through forex derivative instruments (such measures are not directly visible in changes in currency reserves). Some observers believe the central bank also intervened in September in CNH trading outside mainland China to keep the CNH exchange rate near the CNY rate and dampen expectations of yuan depreciation.