Walk the line

8 February 2017 By Pete Sweeney Follow @petesweeneypro

The country’s foreign currency stash fell below $3 tln in January, the lowest in nearly 6 years. That matters less than the line that might get crossed next: the yuan weakening past 7 per dollar. That would mean eating into the reserves still further, or risking U.S. wrath.

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China’s foreign exchange reserves in January fell $12.3 billion to slightly below $3 trillion, according to data published by the People’s Bank of China on Feb. 7. That was the first time the reserves had fallen below that figure in nearly six years.

The January decline, however, was the smallest in seven months, compared to the $41 billion reported in December.

Despite the drop, China still leads the world’s forex reserves. The level has fallen by half a trillion dollars since August 2015, when the yuan devalued sharply. The yuan fell 6.6 percent against the U.S. dollar in 2016, its biggest annual drop since 1994.

Additional research by Kathy Gao.

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