China's foreign exchange reserves dropped a whopping US$93.9 billion, as it fights to stabilize financial markets and halt a slide in the yuan, with its currency devaluation move last month.
China's reserves slumped to US$3.557 trillion according to central bank data unveiled on Monday, 7th Sept.
The decline left market watchers wondering how sustainable China's efforts to support the yuan are, as capital flows out of the country owing to fears of an economic slowdown and prospects of rising US interest rates.
"Frequent intervention will burn foreign reserves rapidly and tighten the onshore market liquidity," said Singapore’s Commerzbank’s senior economist, Zhou Ha.
The decline in reserves quickened, following China's near 2% devaluation of the yuan on Aug 11, stoking fresh concerns about the economy and heavy selling of the currency.
Chinese policymakers will probably keep the yuan on a tight leash in the near-term to head off fears of a global currency war.
Chinese policymakers are now determined to show their financial markets are back to normal, after the devaluation of the yuan, coupled with wild swings in its stock markets, caused jitters in markets around the world.
Chinese equity markets have fallen 40% since mid-June, despite the authorities unleashing a volley of policy responses to try and stem the falls. China's stocks regulator said late on Sunday that it would take more steps to ensure stable markets.
China's government is also pushing on with attempts to ease concerns about the country's slowing economic growth.
Source - Reuters