Ever since the devaluation of the yuan in mid-August, the market woke up to the fact that China had to sell parts of its massive pile of foreign exchange reserves to defend the currency from slipping further. The only question was how much?
On Monday morning, Sept. 7, we are a bit smarter as the People’s Bank of China (PBOC) said it reduced the amount of foreign exchange reserves by $94 billion to $3.557 trillion—down $286 billion for the year and $421 billion since the peak in March 2014.
This confirms most estimates of a reduction of $100 billion, but Goldman Sachs said the real number could be higher. “Sales of foreign exchange reserves might have been underestimated by around US$20 billion, given the currency valuation effect,” the company said in a note.
