A little more than two weeks ago, the People’s Bank of China told us official foreign exchange reserves rose by $11.4 billion for the month of October, the first positive reading in months.
Epoch Times ran the headline “The End of Outflows?“ but concluded the answer was probably no. The data released by the People’s Bank of China (PBOC) just doesn’t give the full picture.
Now Goldman Sachs confirms this suspicion. “Banks net sold $30 billion in foreign exchange (FX) to non-banks in October (vs. $115 billion in September). This is in contrast with earlier released PBOC data that indicated an increase in headline FX reserves,” the analysts write, citing data published by the State Administration of Foreign Exchange (SAFE).
Because China uses state banks to manipulate currencies, data by SAFE is more reliable, as it also reflects the use of derivatives.
We have previously outlined how China is hiding capital outflows using these non-cash contracts, so the real number for October could be even higher. We will only know once more of the currency derivatives mature.
To illustrate the effect of the derivative contracts, Goldman said the $30 billion includes maturing contracts, which had to be settled for cash in October.
